Moody's downgrades Moscow Capital Bank to Caa2 from B3
October 22, 2008
BFSR downgraded to E; deposit ratings on review for further downgrade
Moscow, October 22, 2008 -- Moody's Investors Service has today downgraded
the long-term local and foreign currency deposit ratings of Moscow Capital
Bank ("Moscow Capital") to Caa2 from B3 and placed the ratings on review for
possible further downgrade. Moscow Capital's bank financial strength rating
(BFSR) was also downgraded to E from E+. The bank's Not-Prime short-term
local and foreign currency deposit ratings were affirmed. Concurrently,
Moscow-based Moody's Interfax Rating Agency, which is majority-owned by
Moody's, downgraded Moscow Capital's long-term national scale rating (NSR)
to B3.ru from Baa3.ru and placed it on review for possible downgrade.
According to Moody's and Moody's Interfax, the Caa2/Not Prime/E global scale
ratings reflect Moscow Capital's global default and loss expectation, while
the B3.ru national scale rating reflects the standing of the bank's credit
quality relative to its domestic peers.
"Today's rating action was prompted by the recent tightening of Moscow
Capital's liquidity position and the bank's failures to process on-time
client payments and withdrawals by individual depositors," explains Olga
Ulyanova, a Moody's Assistant Vice President - Analyst and lead analyst for
Moody's understands that Moscow Capital is trying to attract additional
funding by arranging several interbank loans and re-negotiating with the
borrowers the terms of a number of sizeable loans to ensure their early
redemption. "However, while these steps may help the bank close liquidity
gaps in the short term, they might not be sufficient to dramatically improve
the bank's liquidity profile going forward," cautions Ms Ulyanova. Indeed,
the bank is over-reliant on short-term customer funding, including
individual deposits, which, in accordance with the Russian law, can be
withdrawn at any time. Furthermore, Moscow Capital is exposed to long-term
lending with a fairly high concentration in the real estate and construction
According to Moody's, the review of Moscow Capital's ratings will focus on
the bank's ability to improve its liquidity profile and acquire more stable
and long-term funding. Furthermore, given the weakening credit quality of
corporates in Russia, especially those involved in real estate and
construction, Moody's will assess any resulting impact on Moscow Capital's
loan book and financial fundamentals.
Moody's previous rating action on Moscow Capital was implemented on 26
October 2007, when the rating agency assigned first-time ratings of
B3/NP/E+/Baa3.ru to the bank.
Domiciled in Moscow, Russia, Moscow Capital Bank reported total IFRS
assets of USD985 billion, total shareholders' equity of USD92 million and
a net income of USD20 million as at 31 December 2007.
Company — Moscow Capital Bank
Full nameCommercial Bank "Moscow Capital" Ltd.