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S&P: JSC KREDOBANK Raised To 'B+' On Stronger Parental Support; Nat. Scale To 'uaA': Outlook Stable

August 05, 2008 | Cbonds

FRANKFURT (Standard & Poor's) Aug. 5, 2008--Standard & Poor's Ratings Services said today it raised its long-term counterparty credit rating on Ukraine-based JSC KREDOBANK to 'B+' from 'B'. At the same time, the national scale rating was raised to 'uaA' from 'uaBBB'. The 'B' short-term counterparty credit rating was affirmed. The outlook is stable.

This rating action reflects increased integration with and support from the bank's strategic shareholder, Powszechna Kasa Oszczednosci Bank Polski (S.A.) (PKO; BBBpi/--/--; unsolicited rating). The long-term rating on KREDOBANK is therefore two notches (versus one notch previously) higher than the bank's stand-alone creditworthiness.

"Standard & Poor's considers KREDOBANK a strategically important subsidiary for PKO, under our group rating methodology," said Standard & Poor's credit analyst Annette Ess. "The bank benefits from PKO's operational, managerial, funding, and capital support."

The ratings also reflect the bank's modest domestic market position, above-average credit risk, low profitability, and the risky operating environment in Ukraine (foreign currency B+/Stable/B; local currency BB-/Stable/B). Positive rating factors include KREDOBANK's focused organic domestic retail growth strategy and stable deposit-based funding.

KREDOBANK is a midsize Ukrainian commercial bank with a market share of about 1% and total assets of Ukrainian hryvnia 5.0 billion ($1.0 billion) at the end of June 2008. The bank's above-average credit risk stems from its rapid loan growth, untested throughout a full economic cycle; high loan leverage; and still high, but decreasing, single-name concentrations in the loan portfolio. Considerable investments in franchise development and expansion, coupled with low economies of scale, have kept profitability subdued over the past five years.

Supported by shareholder capital injections of a combined $50 million in 2006 and 2007 (an additional $50 million is expected in 2008) and its experience in retail banking, KREDOBANK is implementing a strategy of dynamic organic growth in its domestic market. In addition, its good deposit-based funding supports credit growth.

The stable outlook reflects the balance between the challenges of operating in the unstable and overheating macroeconomic environment of Ukraine and the increased support from and integration with the strategic shareholder, PKO.

"We expect KREDOBANK to be able to successfully implement its domestic growth strategy, supported by its shareholders' experience and ongoing capital contributions, and to maintain control over its credit and market risks," said Ms. Ess.

Company: Kredobank

Full company namePJSC "Kredobank"
Country of riskUkraine
Country of registrationUkraine


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