October 19, 2016 / 4:50 PM / a year ago

Fitch Places Peresvet Bank on RWN

(The following statement was released by the rating agency) MOSCOW, October 19 (Fitch) Fitch Ratings has placed the ratings of Russia-based Peresvet Bank, including its 'B+' Long-term Issuer Default Rating (IDR), on Rating Watch Negative (RWN). A full list of rating actions is available at the end of this rating action commentary. KEY RATING DRIVERS The RWN primarily reflects an increase in funding and liquidity pressures at the bank. In addition, the RWN reflects uncertainty related to the recent change to the bank's CEO. These developments have occurred since the affirmation of the bank's ratings on 30 September 2016. In Fitch's view liquidity has tightened at PB in October 2016 due to repayments of interbank funding. This in turn has led to reported restrictions on maximum daily retail customer deposit withdrawals (of RUB100,000 or USD1,500) and (moderate) increases in deposit rates to limit outflows. The yield on PB's domestic bond spiked to 60%-70% on 18 October, suggesting that the bank's access to liquidity on the interbank market is likely to be very limited. According to PB's regulatory accounts, at end-3Q16 reported liquid and potentially liquid assets comprised RUB11.5bn of cash and placements with CBR and RUB6.5bn of securities not pledged under repo with the central bank. Short-term bank placements with PB (excluding secured repo) were RUB7.3bn, meaning that net of these the bank held close to RUB11bn of liquid or potentially liquid assets. Effectively on demand customer funding at the same date comprised RUB18.1bn of corporate current accounts and RUB22.4bn of retail funding (under Russian law, retail term deposits, like current accounts, can be withdrawn on demand). This suggests potentially material coverage of short-term customer funding by liquid assets, but still a significant sensitivity to deposit outflows. There were no significant wholesale funding maturities in October and November, although some term deposits of legal entities (RUB67.3bn at end-3Q16) may be due in 4Q16. On 14 October, PB announced that the bank's CEO had been replaced by a 'temporary acting' CEO. This creates some uncertainty as to the future management and strategy of the bank given the former CEO's key role at PB and lack of clarity in respect to the circumstances surrounding his departure. For more details on PB's credit profile, see 'Correct: Fitch Affirms 3 Medium-sized Russian Banks', dated 30 September 2016, at www.fitchratings.com RATING SENSITIVITIES The RWN on PB's ratings will be resolved based primarily on the evolution of PB's funding and liquidity profile. Fitch will downgrade PB's ratings if pressures on PB's funding and liquidity intensify. The IDRs could be downgraded to 'RD' (Restricted Default) if deposit withdrawal limits become more restrictive or long-standing. Conversely, the ratings could be affirmed at their current levels if funding and liquidity pressures abate and the bank resumes stable operations following the change in management. The rating actions are as follows: Peresvet Bank Long-Term Foreign and Local Currency IDRs: 'B+', placed on RWN Short-Term Foreign Currency IDR: 'B', placed on RWN National Long-Term Rating: 'A-(rus)', placed on RWN Viability Rating: 'b+', placed on RWN Support Rating: '5', unaffected Support Rating Floor: 'No Floor', unaffected Senior unsecured debt: 'B+'/'A-(rus)'; Recovery Rating 'RR4', placed on RWN Contact: Primary Analyst Dmitri Vasiliev Director +7 495 956 5576 Fitch Ratings CIS Ltd 26 Valovaya Street Moscow 115054 Secondary Analyst Ilya Sarzhin Analyst +7 495 956 9901 Committee Chairperson James Watson Managing Director +7 495 956 9901 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com; Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com. 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