| Moody's changes Rodovid Bank's (Ukraine) review for downgrade to review with direction uncertain |
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11/11/2009 10:42 (90 Day 07:53 minutes ago) | |||||
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The FINANCIAL -- Moody's Investors Service said on November 9 that it is maintaining its rating review of Rodovid Bank. However, the direction of the review has been changed to uncertain, from a possible downgrade.
On the 20th of March 2009, Rodovid Bank's deposit ratings were downgraded to Caa2 from B3 and placed under review for further downgrade. This rating action was driven by the payment moratorium imposed on Rodovid Bank by the National Bank of Ukraine (NBU). At that time, the bank's financial strength rating (BFSR) was also downgraded from E+ to E with a stable outlook.
Today's announcement regarding the direction of the review was prompted by the Ukrainian government's recent announcement that the deposits and most of the performing loans of a troubled Ukrainian bank - Ukrprombank, would be transferred to Rodovid Bank. The amount of the deposits to be transferred is expected to be about UAH7 billion (USD875 million). This additional obligation, if assumed by the bank, would represent a significant increase of its outstanding liabilities (UAH 7.5 billion at end Q3 2009). Of importance to the ratings of Rodovid Bank is that the transfer of assets and liabilities would be accompanied with a substantial capital and liquidity injection from the government. The officials indicated that the deposit transfer and recapitalisation of Rodovid Bank will likely be completed in November 2009.
Moody's believes that these developments increase the likelihood for Rodovid Bank to be recapitalised and start to operate as a going concern.Therefore a review of the ratings with direction uncertain is more appropriate.
Moody's expects that if the transfer does materialise, it is likely to be concluded by January 2010, i.e. before the presidential elections in Ukraine , and to be accompanied by an adequate capitalisation and liquidity injection into Rodovid Bank. In this event, Moody's is likely to conclude its rating review by upgrading Rodovid's BFSR and deposit ratings.
However, if the transfer of the deposits does not materialise and the payment moratorium on Rodovid Bank's liabilities is maintained, this may exert further negative pressure on the bank's ratings. Likewise, a transfer of Ukrprombank's deposits and loans to Rodovid Bank without an adequate capital and liquidity injection would also have negative
The previous rating action on Rodovid Bank was implemented on 20 March 2009, when Moody's downgraded the bank's BFSR to E from E+, its deposit ratings to Caa2 from B3, and its National Scale Rating (NSR) to B3.ua from Baa3.ua. At that time, the bank's deposit ratings remained on review for possible further downgrade.
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