Moody's changes outlook on Gazbank's B3 rating to stable (Russia)
December 21, 2010 Moody's Investors Service
Moscow, December 20, 2010 -- Moody's Investors Service has today changed the
outlook on the B3 long-term global local- and foreign-currency deposit
ratings of Gazbank JSCB to stable from negative, and has affirmed all of the
bank's global-scale ratings. At the same time, Moody's Interfax Rating
Agency affirmed Gazbank's Baa3.ru national-scale credit rating. Moscow-based
Moody's Interfax is majority-owned by Moody's.
Moody's says that the outlook change was prompted by a combined improvement
in (i) Gazbank's asset composition and risk management; (ii) stabilisation
of the bank's financial metrics; and (iii) stabilisation of the operating
environment in the bank's domicile region.
In 2010, Gazbank improved the quality of its margin lending, which
represented 22% of its total loan book, with these loans now being
partially pledged by securities. Moody's also notes that according to
Gazbank's unaudited financial statements (under Russian Accounting
Standards or RAS), the bank remained profitable, with a return on average
assets of 0.3% in the first three quarters of 2010 and 0.4% in 2009. The
bank's capital adequacy is also stable, at 15.0% as of Q3 2010
(according to RAS) and the bank has increased its provisioning level to
8.6% as of Q3 2010 from 6.5% as of year-end 2009.
Nonetheless, Moody's notes that Gazbank continues to maintain high
borrower concentration (the 20 largest credit exposures account for
around 300% of Tier 1 capital), which, together with its high exposure
to margin lending, constitutes significant credit risk.
Moody's observes that the bank's asset quality was also supported by a
gradually reviving regional economy, which had improved due to the
government's significant support to a large regional car producer
(AvtoVAZ), including a successful "old-car scrappage" programme. However,
if this programme is not extended into 2011, the region's operating
environment could deteriorate. Any further deterioration in the operating
environment would affect the bank's asset quality.
Moody's previous rating action on Gazbank was implemented on 28 April
2009, when the rating agency downgraded the bank's deposit ratings to B3
(negative outlook) from B2.
The principal methodologies used in rating Gazbank are "Bank Financial
Strength Ratings: Global Methodology", published in February 2007, and
"Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A
Refined Methodology", published in March 2007, which can be found at
www.moodys.com. Other methodologies and factors that may have been
considered in the process of rating Gazbank can also be found on Moody's
Headquartered in Samara, Russia, Gazbank reported total assets of RUB22
billion (USD700 million) and total shareholders' equity of RUB3.2 billion
as at Q3 2010, according to unaudited Russian Accounting Standards.
Company — Gazbank
Full namePrivate Joint-stock Company Commercial bank "GAZBANK"