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Moody's upgrades NBD Bank to B1/A2.ru; stable outlook (Russia)

June 07, 2011 | Moody's Investors Service

Moscow, June 06, 2011 -- Moody's Investors Service has today upgraded the
long-term deposit ratings of NBD Bank to B1 from B2. The standalone E+ bank
financial strength rating (BFSR) and Not Prime short-term bank deposit
ratings were affirmed.

Concurrently, Moody's Interfax Rating Agency has upgraded NBD Bank's
long-term national-scale credit rating (NSR) to A2.ru from A3.ru.
Moscow-based Moody's Interfax is majority owned by Moody's, a leading global
rating agency. The outlook on the long-term global scale ratings is stable,
whilst the NSR carries no specific outlook.

Moody's re-assessment of the bank's credit standing within the E+ BFSR
category is largely based on NBD Bank's audited financial statements for
2010 prepared under IFRS, as well as NBD Bank's unaudited first quarter IFRS
report at end-March 2011.

RATINGS RATIONALE

"The upgrade of NBD Bank's ratings reflects the recent improvement in the
bank's financial fundamentals," says Semyon Isakov, a Moody's Assistant
Vice-President and lead analyst for the bank. "In addition, the bank's
successful performance amid the recent global financial crisis demonstrated
its ability to absorb significant asset quality stresses without utilising
external support," adds Mr. Isakov. The bank's loan book has seasoned and
its financial performance has materially improved, therefore Moody's is now
considering the mapping of the E+ BFSR to the long-term scale of B1 in order
to better capture credit standing of the bank. The factors that underpin the
bank's B1 rating are, among other things, adequate corporate governance and
risk management procedures employed by the bank, and the low level of
related-party lending.

The Q1 2011 IFRS financial results demonstrated improvements in the bank's
financial fundamentals. According to these results, the level of problem
loans is on the downward trend (individually impaired and collectively
impaired -- overdue by 90 days decreased to 7.6% compared to 10.4% as at
YE2009) and are, in Moody's view, adequately provisioned at the 7.1% level
(as at end-March 2011). Following the decline of credit costs, NBD Bank
enhanced its profitability metrics. Return on Average Assets (RoAA) and
Return on Equity (RoE), improved to 3.1% and 22.1%, respectively, in
Q1 2011. In addition, NBD's capital adequacy is adequate, with the Tier 1
and total capital adequacy ratios reported at 13.1% and 17.8%, respectively,
as at end-March 2011.

Moody's also notes that NBD Bank's ratings continue to be constrained by the
limited geographical diversification concentration of the bank's business
(largely confined to a single region of Russia) that -- along with a limited
market share -- renders the bank's performance vulnerable to the health of
the local economy and competition from the large federal banks which operate
with a lower cost of funding.


Company: NBD-Bank

Full company nameNBD-Bank, Joint-Stock Company
Country of riskRussia
Country of registrationRussia
IndustryBanks

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