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Moody's upgrades the BFSR and the foreign currency deposit rating of Prominvestbank (Ukraine) to E+ and B3, respectively; Stable outlook

November 03, 2009 | Moody's Investors Service

Moscow, November 02, 2009 -- Moody's Investors Service has today 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
Ukraine. The bank's NSR carries no specific outlook.

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
experienced by PIB in October 2008, which could not be stemmed by UAH5
billion liquidity support by the NBU at the time.

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.

The principal methodologies used in rating Prominvestbank were "Bank
Financial Strength Ratings: Global Methodology" and "Incorporation of
Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology,"
which can be found at www.moodys.com in the Ratings Methodologies
sub-directory under the Research & Ratings tab. Other methodologies and
factors that may have been considered in the process of rating this
issuer can also be found in the Rating Methodologies sub-directory on
Moody's website.

Based in Kyiv, Ukraine, Prominvestbank reported total IFRS assets of
UAH27 billion as at 31 December 2008.

Company: Prominvestbank

Full company nameProminvestbank
Country of riskUkraine
Country of registrationUkraine
IndustryBanks

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