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RPT-Fitch Rates Sberbank's USD1bn Subordinated Eurobonds 'BBB-'
February 27, 2014 / 9:37 AM / 4 years ago

RPT-Fitch Rates Sberbank's USD1bn Subordinated Eurobonds 'BBB-'

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Feb 27 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Sberbank of Russia’s (Sberbank; BBB/Stable/bbb) USD1bn “new style” subordinated debt issue with write-off features a Long-term rating of ‘BBB-'.

The notes are issued by Luxembourg-based SB Capital S.A. and the proceeds are on-lent to Sberbank under a subordinated loan agreement. The notes are due in 2024, have a 5.5% coupon paid semi-annually and are callable in five years.

The issue has coupon/principal write-down features, which will be triggered if:

(i) the bank’s core Tier 1 capital adequacy ratio decreases below 2%; or (ii) the Deposit Insurance Agency directly or indirectly acquires a controlling stake in the bank as part of an approved bankruptcy prevention plan. The latter is possible if a bank breaches any of its mandatory capital ratios or is in breach of certain other liquidity and capital requirements.

KEY RATING DRIVERS

Sberbank’s “new style” Tier 2 subordinated debt is rated one notch lower than the bank’s ‘bbb’ Viability Rating (VR). This includes (i) zero notches for non-performance risk relative to the VR, as Fitch believes these instruments should only absorb losses once a bank reaches, or is very close to, the point of non-viability; and (ii) one notch for loss severity (one notch, rather than two, as the issue will not be deeply subordinated).

For more details on Fitch’s approach on rating subordinated debt issues of Russian banks see “Implementation of New Capital Rules in Russia: Moderately Positive, Unlikely to Lead to Rating Changes” dated 19 April 2013 at www.fitchratings.com.

RATING SENSITIVITIES

The issue’s rating is linked to Sberbank’s VR. An upgrade of Sberbank’s VR would be contingent on an upgrade of the Russian Federation and the bank’s continued strong financial metrics. A downgrade of the Russia sovereign would likely result in a downgrade of Sberbank’s VR.

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