December 03, 2008 |
|Fitch Ratings-London/Moscow-2 December 2008: Fitch Ratings has today revised the Outlook on Russia-based Commercial Bank Consumer Finance Company (CFC Bank) to Negative from Stable. At the same time, the agency has affirmed the bank's ratings, including its Long-term Issuer Default rating (IDR) of 'B-'(B minus). A full breakdown of of CFC’s ratings follows below.|
The Outlook revision reflects the challenges that the broader MC Consumer Finance Company (MCCFC) group is facing in the current market environment. These include markedly curtailed access to the wholesale markets, which MCCFC had planned to largely rely on for its funding, and the likely negative impact on both profitability and asset growth. The Negative Outlook also reflects the notably worsened operating environment in Russia which is likely to feed through into a further deterioration in asset quality in the coming months, while the MCCFC’s high proportion of foreign currency loans is also a potential source of credit risk. In addition, Fitch notes markedly increased market risk stemming from a large long position in the Russian Rouble which could result in sizeable losses in the 2008 financial statements due to the ongoing depreciation of the RUB against the USD.
CFC Bank’s ratings also reflect MCCFC’s limited track record, its small size by international standards, high cost base, concentrated funding, with almost sole reliance on the wholesale markets, modest capitalisation and low loan impairment coverage. However, Fitch recognises that considerable progress has been made with respect to funding diversification (with the share of related party funding decreasing to 39% of liabilities at end-H108 from 93% at end-2006), a relatively comfortable liquidity position, with short-term assets generally funded by long-term borrowings, the high collateralisation of the loan portfolio and healthy net interest margin.
CFC Bank is one of the two principal operating subsidiaries of MCCFC, and is highly integrated within the group. MCCFC, a Cyprus-based holding company, was founded in 2004 and owns a number of Russian subsidiaries that offer car loans to individuals, and conduct leasing and residential mortgage lending. CFC Bank books all the group’s mortgages and a small part of the group’s car loans on its balance sheet, and also owns and consolidates a leasing company in its accounts. Fitch understands that all MCCFC's companies are run centrally by one management team, and that the group is regarded as a single entity by its shareholders, who are a number of individuals. Risk management is fully centralised and most funding is raised at the head company (MCCFC).
CFC Bank’s ratings are as follows:
Long-term IDR: affirmed at ‘B-'(B minus); Outlook revised to Negative from Stable
Short-term IDR: affirmed at 'B'
Individual: affirmed at 'D/E'
Support: affirmed at '5'
Support Rating Floor assigned at ‘No Floor’
Company: CFC Bank
|Full company name||Commercial bank «Consumer Finance Company» (Open Joint-Stock Company)|
|Country of risk||Russia|