(Repeat for additional subscribers)
Feb 5 (The following statement was released by the rating agency)
Fitch Ratings has assigned Development Bank of the Republic of Belarus (DBRB) Long-term
foreign and local currency Issuer Default Ratings (IDR) of 'B-' with Stable Outlook. A full list
of rating actions is provided at the end of this comment.
KEY RATING DRIVERS
DBRB's ratings are underpinned by a high propensity of support from the
government of the Republic of Belarus, if needed. However, Fitch's view of the
fairly weak credit profile of the sovereign, and hence its ability to provide
assistance, mean that support cannot be relied upon.
Fitch's view of the high propensity to support is based on the bank's 95%
ownership by the Council of Ministers of the Republic of Belarus, DBRB's legally
defined policy role of lending under state-directed programmes, and its close
association with the Belarusian authorities. DBRB's Board of Directors is
chaired by the Belarusian Prime Minister and includes high-ranked officials, and
major decisions affecting the bank are taken at governmental level. The dominant
share of local currency funding (mostly bonds) in DBRB's liabilities means that
the authorities' ability to provide support should not be heavily dependent on
the sovereign's external finances.
DBRB's loan book is dominated by large and fairly high-risk loans issued under
government programmes and taken over from other state banks as part of the
government's strategy aimed at consolidating such loans within DBRB. Most of
these loans were issued at low rates to state-owned companies (92% of the
largest 25 exposures at DBRB), while the bank gets compensated by the Ministry
of Finance for the interest expense it pays on market-rate funding.
Reported NPLs (overdue over 90 days) and restructured loans at end-1H13 were
high at 12% and 4%, respectively, of gross loans, but both were fully covered by
reserves. DBRB's portfolio growth plans will be defined by government directives
on new lending under government programmes (earmarked at about BYR4trn for 2014)
and on loan transfers from state banks (BYR1.15trn planned in 2014).
As a development bank DBRB is exempt from regulatory capital requirements. The
bank's total capital adequacy ratio calculated in line with statutory
requirements was 30% at end-1H13 (22% as per Basel standards). This ratio
increased further to 38% at end-2013 following a BUR2.8trn capital injection.
The sizable capital buffers meant that the bank could have reserved up to half
of the loan book at end-2013 before breaching the internal capital adequacy
limit of 10% set by the Board of Directors.
DBRB's liquidity is reasonable at present, while refinancing and foreign
currency risks are limited. Liquid assets were moderate at approximately
BYR1.4trn or 2% of assets at end-3Q13; however, DBRB is not allowed to attract
customer deposits and its funding is mainly wholesale borrowings, most of which
are long-term local bonds (82% of liabilities) held by the National Bank of the
Republic of Belarus and state-owned banks. The remainder are deposits attracted
from the Ministry of Finance. Liabilities maturing in 2014 represented a
moderate BYR670bn or 3% of end-3Q13 liabilities.
The ratings are likely to move in tandem with Fitch's assessment of the
sovereign credit profile.
The rating actions are as follows:
Long-term Foreign and Local Currency IDRs: assigned at 'B-'; Outlook Stable
Short-term Foreign Currency IDR assigned at 'B'
Support Rating assigned at '5'
Support Rating Floor assigned at 'B-'