MOSCOW (Standard & Poor's) March 16, 2010--Standard & Poor's Ratings Services revised its outlook on PJSC KREDOBANK to stable from negative. At the same time, the 'CCC+' long-term and 'C' short-term counterparty ratings were affirmed. The Ukraine national scale rating was raised to 'uaBB-'from 'uaB'.
"The outlook revision reflects the better prospects for economic stability in Ukraine following the recent formation of a new governing coalition and cabinet," said Standard & Poor's credit analyst Maria Malyukova. "It also takes into account the bank's imminent $46 million capital increase, which will provide an additional cushion against asset-quality deterioration."
The ratings on the bank continue to reflect its mediocre asset quality, poor profitability, and the still risky and volatile operating environment in Ukraine (foreign currency B-/Positive/C; local currency B/Positive/B; Ukraine national scale 'uaBBB'). On a positive note, the bank benefits from ongoing and expected support from its 99.5% shareholder, Powszechna Kasa Oszczednosci Bank Polski (S.A.) (PKO; 'BBBpi'; unsolicited public information "pi" rating). Therefore, the long-term rating includes a one-notch uplift from the bank's stand-alone credit profile. We consider KREDOBANK to be a strategically important subsidiary of PKO, given the importance of Ukraine for PKO's growth strategy and track record of support.
The stable outlook balances the expected improvement in KREDOBANK's capitalization and higher prospects for economic stability with the high credit risk and still highly risky and volatile operating environment in Ukraine.
"We would consider a positive rating action if the banking-sector turbulence eases considerably and the bank is able to improve its asset quality and financial performance," said Ms. Malyukova.
A negative rating action would be triggered by further deterioration in the bank's stand-alone credit profile or a reduction in parental support.