Russian Troika Dialog Group 'B+' Long-Term Rating Remains On CreditWatch Positive Pending Acquisition By Sberbank
November 9, 2011 Standard & Poor's
• Russian state savings bank Sberbank of Russia (Sberbank) signed an agreement to acquire 100% of Russian investment banking group Troika Dialog on March 11, 2011.
• The transaction should be completed over the coming months, pending regulatory approval.
• We are therefore keeping our 'B+' counterparty credit and 'ruA+' Russia national scale ratings on Troika Dialog Group Ltd. on CreditWatch positive, where they were placed on March 16, 2011.
• The CreditWatch status reflects our view that Troika Dialog will likely become a strategically important member of the Sberbank group once the transaction is completed.
PARIS (Standard & Poor's) Nov. 9, 2011--Standard & Poor's Ratings Services said today that it is keeping its 'B+' long-term counterparty credit and 'ruA+' Russia national scale ratings on Russia-based Troika Dialog Group Ltd. on CreditWatch with positive implications, where they were placed on March 16, 2011. At the same time, the 'B' short-term counterparty credit rating on the entity was affirmed.
The ratings on Troika Dialog Group Ltd., the holding company of Troika Dialog (comprised of a group of companies in brokerage and investment banking), reflect the risky Russian operating environment and Troika Dialog's vulnerability to capital markets cycles in securities brokerage, sales, and trading. Positive rating factors include Troika Dialog's leading market position, successful strategy, and adequate capital and liquidity. Our notional stand-alone credit profile (SACP) on the consolidated group of companies that comprise Troika Dialog is 'b+'.
On March 11, 2011, Russian state savings bank Sberbank of Russia (Sberbank; not rated) and Troika Dialog signed a memorandum of understanding to combine the two groups. The transaction, whereby Sberbank will purchase 100% of Troika Dialog, is subject to regulatory approval in Russia and the other countries where both groups operate. We think it highly likely that the transaction will be completed over the coming months.
Sberbank has a 27% market share of systemwide banking assets and a 46% share of retail deposits, and is also rapidly expanding in the Ukraine, Belarus, and other Commonwealth of Independent States (CIS) countries. It does business with virtually all Russian private and public sector industrial companies. Sberbank's pre-tax income in the first half of 2011 was Russian ruble (RUR) 219 billion ($7.2 billion), an amount roughly equivalent to Troika's total assets in 2011.
The CreditWatch status reflects Sberbank's full acquisition of Troika Dialog, subject to regulatory approval and closure in the coming months. In our opinion, Troika Dialog will likely become a strategically important member of the Sberbank group once the transaction is completed. Upon completion, we could raise the global and national scale ratings on Troika Dialog Group Ltd. The amount of the uplift will depend on the following:
• Our assessment of the group's notional SACP (currently 'b+');
• Our assessment of Sberbank's creditworthiness;
• The pace and extent of the projected integration of Troika Dialog into Sberbank's corporate, investment banking, and asset management business lines; and
• Our assessment of the likelihood that Sberbank would financially support Troika Dialog if needed.
We will resolve the CreditWatch placement when the regulatory approval is received and the timing of the financial transaction is certain.
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Full nameJSC Sberbank CIB