Moody's downgrades Forum Bank to B3, outlook negative

London, 02 August 2012 -- Moody's Investors Service has today downgraded Forum Bank's long-term local-currency deposit rating to B3 from B2. The outlook on the rating remains negative. Concurrently, the rating agency downgraded the bank's National Scale Rating (NSR) to Baa3.ua from A3.ua. The rating action follows the recent announcement by its parent bank, Commerzbank (A3/P-2/D+/baa3, negative), that it plans to sell its stake in Forum Bank to a Ukrainian investment holding company, Smart Group (unrated). Forum Bank's bank financial strength rating is unaffected by today's rating action. RATINGS RATIONALE Today's rating action follows Commerzbank's announcement that it had reached an agreement to sell its approximately 96% stake in Forum Bank to Smart Group. In light of this development, Moody's has removed the one-notch rating uplift which is factored into Forum Bank's long-term deposit ratings from the assumption of parental support. This has led to a downgrade of the bank's local-currency long-term deposit rating to B3 from B2, which is now in line with the bank's standalone credit strength of b3. While information on Forum Bank's new shareholder is currently limited and the announced transaction is still subject to the approval of the regulatory authorities, Moody's says that departure of Commerzbank (Germany's second-largest private banking group) has negative implications for the bank's risk profile. Namely, there is a risk that changes in the ownership structure could lead to weakening corporate governance practices and increase related-party transactions. In addition, the bank's capital, liquidity and funding profile could also weaken following the sale, as Forum Bank had benefited from parental capital and funding support (albeit decreasing in recent years) in the past. Over the next several months, Moody's will closely monitor the implications of the announced transaction on Forum Bank's financial profile, particularly focusing on the bank's liquidity and capitalisation.

• Full name
  PUBLIC JOINT STOCK COMPANY "BANK FORUM"
• Registration country
  Ukraine
• Industry
  Banks