Special Comment on CBM Eurobond Placement

Today Credit Bank of Moscow (В1/В+/ВВ-) is starting a road-show for a Eurobond issuance that will take place during January 16–24 in Asia, Europe, and the US. Then the issuer will report possible characteristics of the issue. In our view, the bank can place dollar-denominated Eurobonds worth about $500.0 million. The expected tenor of the new issue is 3–5 years.
While positioning the issue, we used the yield curve of Promsvyazbank. Given the bank’s strong financial stability, the spread between the new issue and Promsvyazbank’s curve should not exceed 50–75 b. p. Hence, a 3-year issue will have a fair yield guidance of 6.3–6.55% per annum. A 5-year tenor suggests a range of 7.05–7.2% per annum.

Key Points:
- Credit Bank of Moscow is one of the leading Russian banks. After 9 months 2012 the bank ranked 21th by net assets in the RBC rating.
- Roman Avdeev remains the bank’s majority shareholder who owns 85.0% of the bank’s authorized capital through Rossium Concern. EBRD and IFC own 7.5% each.
- In 2012 the bank maintained brisk loan portfolio growth. During 9 months loan portfolio increased 28.6%.
- Loan portfolio quality remains one of the best in the sector. After 9 months NPL accounted for 1.2% of the loan portfolio, NPL 1+ made up just 1.8% of the loan portfolio.
- Provisions/NPL ratio stays at a high level and totals 191.2%.
- The bank also retained strong liquidity: liquid assets, including demand balance and bonds included on the CBR Lombard list, account for about 15.6% of assets.