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Moody's Interfax downgrades Bank Stroykredit's rating to Ba2.ru from Baa2.ru (Russia)

November 2, 2011
Moscow, November 02, 2011 -- Moody's Interfax Rating Agency has downgraded
long-term national scale credit rating (NSR) of Bank Stroykredit (BSK) to
Ba2.ru from Baa2.ru. Moscow-based Moody's Interfax is majority owned by
Moody's, a leading global rating agency. The NSR carries no specific

Moody's assessment is primarily based on BSK's audited financial
statements for 2010 prepared under IFRS, the bank's unaudited
(management) accounts for 2011, as well as its 2011 monthly accounting
statements prepared under local statutory accounting rules (local GAAP).

Please see ratings tab on the issuer/entity page on moodys.com for
information on Global Scale Rating.


The rating action reflects Moody's concerns over (i) BSK's risky approach
towards accumulating significant levels of real estate linked mutual
funds, (ii) weak recurring profitability, (iii) low capital adequacy and
(iv) limited reporting transparency.

Moody's notes that BSK has increased its exposure to non-core banking
assets. As of 1 October 2011, investments to real estate linked mutual
funds accounted for over 180% of the bank's regulatory capital (c.a.142%
as of YE2010), reflecting BSK's high risk appetite. Moreover, the
quality and liquidity of BSK's investments are difficult to assess
because the bank does not disclose underlying assets of the mutual funds
under IFRS.

Moody's also observes that the bank's low net income in 3Q 2011 was
mainly attributable to positive revaluation of mutual funds, while
recurring revenues barely covered operating expenses. Whilst BSK complies
with Central Bank of Russia (CBR) regulatory requirements on
capitalisation -- against the background of low profitability in 2010 and
3Q 2011, and 36% loan growth in 3Q 2011 -- the bank's regulatory capital
adequacy decreased to 14.2% as of 1 October 2011 from 22% at YE2010, thus
rendering the bank more vulnerable to seasoning of the loan book and to
potential deterioration of its non-core assets. Given the adverse credit
conditions in which BSK operates, the rating agency does not expect
material improvements in the bank's capitalisation in 2011-2012.

According to Moody's, BSK's ratings are underpinned by the bank's growing
deposit taking and lending franchise as well as a sizeable liquidity
portfolio, with liquid assets accounting for over 25% of the bank's total
assets as of 1 October 2011.


The methodologies used in this rating were 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. Please see the Credit
Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Moscow, Russia, BSK reported total assets of RUB18
billion (US$593 million) under audited IFRS at YE2010.

Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are
intended as relative measures of creditworthiness among debt issues and
issuers within a country, enabling market participants to better
differentiate relative risks. NSRs differ from Moody's global scale
ratings in that they are not globally comparable with the full universe
of Moody's rated entities, but only with NSRs for other rated debt
issues and issuers within the same country. NSRs are designated by a
".nn" country modifier signifying the relevant country, as in ".ru" for
Russia. For further information on Moody's approach to national scale
ratings, please refer to Moody's Rating Implementation Guidance published
in August 2010 entitled "Mapping Moody's National Scale Ratings to Global
Scale Ratings".
Company — Stroycredit Bank
  • Full name
    OJSC Commercial Bank «Stroycredit»
  • Registration country
  • Industry