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Fitch Affirms VTB Leasing, VEB Leasing and Sberbank Leasing at 'BBB'

April 19, 2011 Fitch Ratings
Fitch Ratings-London/Moscow-18 April 2011: Fitch Ratings has affirmed Russia-based Sberbank Leasing's (SL), VEB Leasing's (VEBL) and VTB Leasing's (VTBL) Long-term Issuer Default Ratings (IDR) at 'BBB' with Stable Outlooks. Simultaneously, the agency has assigned SL and VTBL a National Long-term rating of 'AAA(rus)'.

Fitch has also assigned VEBL's three senior unsecured bonds, series 3, 4 and 5, each with a nominal value of RUB5bn, a final Long-term rating of 'BBB' and a National Long-term rating of 'AAA(rus)'. The series 3 bond issue has a put option in three years and a coupon rate of 7.5%, while series 4 and 5's put options will be available in five years and the coupon rate is 8.6%. The bonds will have an expected maturity of 10 years. VEBL's obligations under the notes will rank equally with the claims of VEBL's existing senior unsecured debt. A full list of ratings actions is at the end of this commentary.

The three companies' ratings reflect Fitch's view of the likelihood of support from their respective parents, state-owned banks VTB Bank (VTB; 'BBB'/Stable/'C/D'), Sberbank of Russia (Sberbank; 'BBB'/Stable/'C') and Vnesheconombank (VEB; 'BBB'/Stable) in the event it is needed. This view is based on the companies' ownership structures, high level of integration with their parents and their still small size relative to their parents' balance sheets. All the companies are solely owned directly by their parent banks, either directly (VTBL and SL) or partially through subsidiaries (VEBL) and operate as the leasing arms of their parent institutions.

The companies rely on funding provided by their parents, but the share of related party funding in total liabilities ranges from 100% for SL to 31% at VEBL at end-2010, while VTBL received 64% of its funding from its parent at end-2010.

The business of all three companies expanded rapidly during 2010 amid the economic recovery in Russia. The companies' lease books remained highly concentrated in both lessees and leased assets with particularly high concentrations in leasing of rolling stock and airplanes at each of the companies.

Asset quality deterioration was more marked at VTBL during the crisis, due to its significant Ukrainian exposure and some large ticket Russian exposures of weaker credit quality. However, VTB recapitalised its subsidiary in 2009. SL operates with a tighter reported equity/assets ratio than VTBL and VEBL, but Sberbank's full funding of SL's balance sheet underlines its commitment to the subsidiary.

The ratings actions are as follows:

VTB Leasing
Long-term foreign and local currency IDR: affirmed at 'BBB'; Stable Outlook
National Long-term rating: assigned at 'AAA(rus)', Stable Outlook
Short-term foreign currency IDR: affirmed at 'F3'
Support Rating: affirmed at '2'
Senior unsecured debt long-term rating affirmed at 'BBB'

VEB Leasing
Long-term foreign and local currency IDR: affirmed at 'BBB'; Stable Outlook
National Long-term rating: affirmed at 'AAA(rus)', assigned Stable Outlook
Short-term foreign currency IDR: affirmed at 'F3'
Support Rating: affirmed at '2'
Senior unsecured debt long-term rating affirmed at 'BBB'

Sberbank Leasing
Long-term foreign and local currency IDR: affirmed at 'BBB'; Stable Outlook
National Long-term rating: assigned at 'AAA(rus)', Stable Outlook
Short-term foreign currency IDR: affirmed at 'F3'
Support Rating: affirmed at '2'

Company — VTB-Leasing
  • Full name
    VTB Leasing
  • Registration country
    Russia
  • Industry
    Financial institutions