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Moody's downgrades deposit ratings of Gazbank (Russia) to B3; negative outlook

April 29, 2009 "Moody’s"
Moscow, April 28, 2009 -- Moody's Investors Service has today downgraded
the long-term local and foreign currency deposit ratings of Gazbank to B3
from B2. The outlook on the deposit ratings has been changed to negative.
At the same time, Gazbank's bank financial strength rating (BFSR) E+ as
well as its Not-Prime short-term local and foreign currency deposit
ratings were affirmed. Concurrently, Moody's Interfax Rating Agency
downgraded the bank's long-term national scale rating (NSR) to Baa3.ru
from Baa1.ru. The NSR carries no specific outlook.

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

"The rating action is driven by a combination of (i) increased riskiness
of Gazbank's lending operations, which has already resulted in rise of
single-borrower concentration and lending to a distressed construction
and real estate sectors; and (ii) the generally deteriorating
macroeconomic environment in Russia, which is additionally aggravated by
the impairments in Samara region's key sectors, namely car manufacturing,
and oil production and refining. Moody's cautions that these factors
might translate into significant deterioration of the bank's asset
quality, capital adequacy and profitability in the course of 2009," says
Maxim Bogdashkin, a Moscow-based Moody's Analyst, and lead analyst for
this issuer.

The rating agency notes, that Gazbank's liquidity is likely to be
sufficient to meet all repayment needs in the near term. At the same
time, the bank's reliance on large corporate depositors and high share of
retail deposits render its liquidity sensitive to possible significant

According to Moody's asset quality stress-tests, Gazbank's capital
adequacy (total capital adequacy stood at 13% as of YE2008) might be
materially impaired by expected asset quality deterioration.

A further downgrade of Gazbank's ratings might occur as a result of
higher-than-expected deterioration of the bank's assets, reducing both
the asset quality and capital adequacy to levels no longer consistent
with the current rating. However, such events are unlikely in the medium
term and significantly depend on the duration of Russia's economic

A revision of Gazbank's negative rating outlook to stable could be driven
by successful decrease in the bank's loan book concentrations, provided
that asset quality, capital adequacy and liquidity remain strong.

Moody's previous rating action on Gazbank was on 24 October 2005 when the
rating agency assigned B2/Not Prime/E+ ratings with stable outlook to the

The principal methodology used in rating Gazbank is "Bank Financial
Strength Ratings: Global Methodology", which can be found at
www.moodys.com in the Credit Policy & Methodologies directory, in the
Ratings Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating Gazbank can also be
found in the Credit Policy & Methodologies directory.

Headquartered in Samara, Gazbank had total assets of RUB30.0 billion
(US$1.0 billion) and equity of RUB3.4 billion (US$115.2 million)
according to the bank's IFRS as of YE2008.
Company — Gazbank
  • Full name
    Private Joint-stock Company Commercial bank "GAZBANK"
  • Registration country
  • Industry