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Moody's assigns B3/NP/E+/Baa3.ru ratings to Moscow Capital Bank (Russia)

October 29, 2007
First-time ratings

Moody's Investors Service today assigned the following global scale ratings to Moscow Capital Bank ("MCB"): a bank financial strength rating ("BFSR") of E+ and long-term and short-term local and foreign currency deposit ratings of B3/Not Prime. Concurrently, Moody's Interfax Rating Agency assigned a long-term national scale rating of Baa3.ru to MCB. Moscow-based Moody's Interfax is majority-owned by Moody's, a leading global rating agency. The outlook on the global scale ratings is stable, while the national scale rating carries no specific outlook.

According to Moody's and Moody's Interfax ("Moody's"), the B3/Not Prime/E+ global scale ratings reflect MCB's global default and loss expectation, while the Baa3.ru national scale rating reflects the standing of the bank's credit quality relative to its domestic peers.

Moody's notes that MCB is unlikely to receive support from its owners or from the Russian government in case of distress. Hence, the B3 long-term foreign currency deposit rating assigned to the bank does not incorporate any probability of external support.

According to Moody's, the E+ BFSR is constrained by MCB's limited franchise, the high borrower and industry concentration in its loan portfolio, the bank's large exposure to related-party lending, the low level of economic capital and underdeveloped corporate governance practices. More positively, the rating reflects the bank's consistently broadening branch network and territorial coverage, as well as its satisfactory profitability indicators, including healthy net interest margin.

Moody's notes that an upgrade of MCB's BFSR might be possible in the event of a visible improvement in the bank's economic capitalisation, a strengthening of its franchise and a sustainable reduction in both the related-party exposure and the concentration in the loan portfolio, provided this is accompanied by a consistent strengthening of the bank's corporate governance practices.

Although a downgrade of MCB's current ratings is a remote likelihood, it may be a possibility in the event of a further increase in related-party exposure or a decline in capitalisation. Any material deterioration in the quality of the bank's asset portfolio, especially if coupled with a negative impact on the profitability, could also exert downward pressure on the bank's BFSR.

Domiciled in Moscow, Moscow Capital Bank conducts its business through the head office, as well as 9 regional branches and 47 outlets. As at the end of 2006, MCB reported total assets of USD570 million (2005:
USD295 million), total capital of USD58 million (2005: USD32 million) and net income of USD8 million (2005: USD3 million).
  • Full name
    Commercial Bank "Moscow Capital" Ltd.
  • Registration country
  • Industry