Fitch Upgrades Russia's VTB North-West to 'BBB+'; Outlook Stable
September 28, 2007
Fitch Ratings has today upgraded Russia-based JSC Bank VTB North-West’s (VTB NW) Long-term and Short-term Issuer Default ratings (IDRs) to ‘BBB+’ and ‘F2’, respectively. Fitch has also resolved the Rating Watch Positive (RWP) on VTB NW’s Long- and Short-term IDRs, and the Outlook for the Long-term IDR is now Stable. The bank’s other ratings are affirmed at Individual ‘D’ and Support ‘2’..
The upgrade reflects the increasing operational integration between VTB NW and its parent JSC Bank VTB (VTB, rated ‘BBB+’/Stable Outlook), and the closer oversight of VTB NW by VTB, facilitated by a supervisory board formed primarily of VTB’s top managers. The upgrade also takes into account the closer identity between the two banks following the rebranding earlier this year of VTB NW (formerly Industry & Construction Bank) and the fact that VTB NW continues to book the vast majority of VTB Group’s corporate business in north-west Russia.
Fitch initially placed VTB NW’s Long- and Short-term IDRs on RWP in October 2006 on the approval by VTB NW’s shareholders of a merger with VTB. Fitch expected to resolve the RWP following the completion of the merger, which was expected by end-Q107, but the merger was postponed until the autumn of this year due to VTB’s public share offering, which took place in May 2007. However, VTB has recently decided not to proceed with the merger, mainly because, according to Russian corporate legislation, its creditors would receive the right to withdraw funds from the bank. Given currently weak capital markets and the fact that the bank’s debt is trading below par value, the withdrawl right would be likely to trigger an early repayment of this debt. VTB may still seek to complete the merger if and when market conditions change.
VTB NW is the leading bank in the north-west of Russia and 15th-largest (by assets) in the country. VTB owns 75% plus three shares in VTB NW. VTB’s other ratings are Short-term IDR ‘F2’, Individual ‘C/D’, Support ‘2’, Support Rating Floor ‘BBB+’, National Long-term ‘AAA(rus)’ with Stable Outlook.
Company — VTB Bank North-West
Full nameVTB Bank North-West