| Moody's upgrades the BFSR and the foreign currency deposit rating of Prominvestbank (Ukraine) |
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03/11/2009 11:02 (18 Day 11:59 minutes ago) | ||||
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The FINANCIAL -- Moody's Investors Service has on November 2 upgraded the long-term global scale local currency deposit rating of Prominvestbank (PIB) to B2 and its foreign currency deposit rating to B3 from Caa2.
At the same time, PIB's bank financial strength rating (BFSR) was upgraded to E+ from E, its Not Prime short-term global scale local and foreign currency deposit ratings were affirmed, and the National Scale rating (NSR) was upgraded to A2.ua from B3.ua. The bank's global scale local currency deposit rating and BFSR carry a stable outlook, while its foreign currency deposit rating carries a negative outlook in line with the outlook for foreign currency bank deposit ceiling for
The rating actions conclude the review with direction uncertain that was initiated by Moody's on 9 October 2008 when PIB was placed into temporary administration by the National Bank of Ukraine (NBU) following the concerns about the bank's ability to continue its operations. The regulator's administration process was preceded by a run on deposits
Moody's upgrade of PIB's ratings has been prompted by the recently provided financial support from its new shareholder Vnesheconombank (VEB, rated Baa1/Prime-2), holding a stake of approximately 94% in the bank, as well as VEB's declared intention to keep PIB on its balance sheet at least for the medium term.
"In Moody's view, the capital injections made in Q1 2009 and September 2009 totaling UAH5.1 billion (USD637 million) substantially improved PIB's liquidity profile and capital position, enabling the bank to absorb large credit losses," says Yaroslav Sovgyra, a Moody's Vice President -- Senior Credit Officer and the lead analyst for PIB. "The bank's management estimates Total CAR to be approximately 21% as at 30 September 2009, whilst the bank's capital almost fully consists of Tier 1 capital."
Moody's views PIB's current financial standing as stable, and while problem loans represented over 25% of the bank's loan book as at H1-2009, the rating agency expects these to be substantially covered by provisions by the end of 2009.
Moody's notes that PIB's ability to build its franchise and attract new clientele -- after certain reputation damage -- represents the key rating driver in the medium term, which is critical for generation of stable flow of operations and recurring earnings.
Despite PIB's almost full ownership by VEB, Moody's notes a limited strategic fit between VEB and its newly acquired subsidiary. As a result, the rating agency assesses the probability of parental support as low, resulting in a one-notch uplift to the bank's deposit ratings from its Baseline Credit Assessment (BCA) of B3.
Moody's previous rating action on PIB was on 9 October 2008 when the BFSR was downgraded to E from E+; its long-term local currency bank deposit ratings were downgraded to Caa2 from Ba2; its foreign currency bank deposit ratings were downgraded to Caa2 from B2; and its NSR was downgraded to B3.ua from Aa1.ru. At that time, the bank's long-term deposit ratings had also been placed on review with direction uncertain.
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