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Fitch Affirms Uraltransbank at 'B-'
July 10, 2014 / 2:36 PM / 3 years ago

Fitch Affirms Uraltransbank at 'B-'

(The following statement was released by the rating agency) MOSCOW, July 10 (Fitch) Fitch Ratings has affirmed Russia-based Uraltransbank's (UTB) Long-term Issuer Default Rating (IDR) at 'B-' with Stable Outlook. A full list of rating actions is available at the end of this commentary. KEY RATING DRIVERS UTB's ratings reflect the bank's weak asset quality, narrow franchise and moderate capitalisation. At the same time the ratings reflect adequate pre-impairment profitability and currently comfortable liquidity position. Asset quality risks stem less from high non-performing loans (NPLs; more 90 days overdue), which are fully reserved, than from weakly provisioned restructured loans. The former accounted for 13.8% of gross loans at end-2013, while a further 7.3% of bad loans were transferred to debt collection companies with the bank retaining credit risk. Both categories were fully covered by loan impairment reserves which equaled 22% of total loans. However, restructured loans, which would otherwise be NPLs, accounted for another 14.7% of loans and were weakly reserved. Fitch Core Capital (FCC) ratio stood at a reasonable 15.2% at end-2013, but regulatory Tier 1 ratio was much tighter at 7.4% at end-4M14, mainly because the former includes property revaluation reserves, and due to a larger operational risk component under regulatory rules. Total regulatory capital ratio was 14.1% at end-4M14, allowing the bank to increase impairment reserves by only 4% (up to a maximum 19%) before breaching the minimum required 10% capital ratio which is a small buffer for the bank's high restructured loans. Pre-impairment profit was reasonable at 5.4% of average gross loans in 2013, offering additional loss absorption capacity. However, this was insufficient to cover impairment charges in 2013, leading to moderate bottom-line losses. The bank also showed a small loss in 5M14 regulatory accounts. UTB's liquidity is comfortable with liquid assets covering 40% of total customer accounts (main source of funding representing 95% of total liabilities) at end-4M14. RATING SENSITIVITIES UTB's ratings could be downgraded if asset quality and capital come under greater pressure. Upside potential is currently limited taking into account the narrow franchise and weak asset quality. The ratings are as follows: Long-term IDR: affirmed at 'B-', Outlook Stable Short-Term IDR: affirmed at 'B' Viability Rating: affirmed at 'b-' Support Rating: affirmed at '5' Support Rating Floor: affirmed at 'No Floor' National Long-term rating: affirmed at 'BB-(rus)', Outlook Stable Contact: Primary Analyst Anton Lopatin Director +7 495 956 70 96 Fitch Ratings Moscow 26 Valovaya Street Moscow 115054 Secondary Analyst Alyona Plakhova Analyst +7 495 956 24 09 Committee Chairperson James Watson Managing Director +7 495 956 66 57 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email:; Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: Additional information is available at Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 31 January 2014, are available at Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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