Moody's upgrades Credit Dnepr Bank to B2; stable outlook
November 22, 2011 Moody's Investors Service
London, 22 November 2011 -- Moody's Investors Service has today upgraded the long-term local currency deposit rating of Credit Dnepr Bank to B2 from B3. Moody's also affirmed the standalone E+ bank financial strength rating (BFSR) which now maps to B2 on the long-term scale, the B3 foreign currency deposit rating and the Not Prime short-term bank deposit rating.
All long term global scale ratings now carry a stable outlook.
Concurrently, Moody's has upgraded Credit Dnepr Bank's National Scale Rating (NSR) to A3.ua from Baa1.ua. NSRs carry no specific outlook.
Moody's assessment is based on Credit Dnepr Bank's audited financial statements for 2010 prepared under IFRS, and unaudited interim statements for Q3 2011 under IFRS.
According to Moody's, the rating action reflects material improvements to Credit Dnepr Bank's franchise as well as the bank's track record of satisfactory financial performance. The rating action also reflects Credit Dnepr Bank's proven resilience to the global financial crisis without experiencing any reduction in business activity, or impairing its franchise.
Moody's notes that since year-end 2010 (when the rating agency changed outlook on Credit Dnepr Bank's deposit rating to positive) the bank has continued its business development and is ranked among the top 27 banks in Ukraine in terms of total assets as at 30 September 2011 (up from 30 at year-end 2010). During the first nine months in 2011, Credit Dnepr Bank opened 23 new regional offices and increased its loan book and deposit base by over 20%. As a result of this strategy of regional expansion, the rating agency expects the bank to further improve its regional presence and further increase distribution capacities.
Moody's says that Credit Dnepr Bank's financial performance has been satisfactory in recent years against the background of difficult credit conditions in Ukraine and the bank's growing level of operating expenses related to its regional expansion. The rating agency therefore expects an improvement in Credit Dnepr Bank's profitability which, in the medium to long term, will be supported by increased business volumes and a stabilising cost base, as the bank will start benefiting from economies of scale.
In addition, Moody's views Credit Dnepr Bank's risk appetite as relatively conservative, with the focus mainly on selective corporate borrowers of satisfactory credit standing. Credit Dnepr Bank's non-performing loans (NPLs, loans overdue more than 90 days) rose to 5.7% of the loan portfolio at end-September 2011, from 5.3% at end-September 2010, and remained below the system average. Credit Dnepr Bank's asset quality has benefited from the bank's limited exposure to retail loans -- particularly FX loans to unhedged retail borrowers, which significantly deteriorated during the recent crisis as a result of local currency devaluation and prolonged difficult economic conditions in Ukraine.
Moody's also observes that in response to challenges in the Ukrainian operating environment, the Credit Dnepr Bank has adopted a more conservative approach to liquidity management by maintaining a sufficient liquidity cushion which represented 26% of total assets at 30 September
2011 (2010: 32% and 2009: 38%). Credit Dnepr Bank's funding base mainly comprised customer accounts, and remained well balanced between corporate and retail funds. The bank's capitalisation has also been adequate, with its Total Capital Ratio exceeding 20% and largely sufficient to absorb expected medium-term credit losses.
Company — Kredit Dnepr
Full namePJSC Bank "Kredit-Dnepr"