Moody's downgrades Moscow Capital Bank to Caa2 from B3

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 Moscow Capital. 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on short-term customer funding, including individual deposits, which, in accordance with the Russian law, can be withdrawn at any time.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 sectors. 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.

• Full name
  Commercial Bank "Moscow Capital" Ltd.
• Registration country
  Russia
• Industry
  Banks