Moody's places Rosprombank's ratings on review for downgrade
January 23, 2013 Moody's Investors Service
London, 23 January 2013 -- Moody's Investors Service has today placed on review for downgrade the B3 local and foreign currency deposit ratings, and E+ BFSR (mapping to b3 standalone credit strength ) of Russia-based Rosprombank.
Moody's assessment is primarily based on Rosprombank's monthly financial statements prepared under local statutory accounting rules (Russian Accounting Standards or RAS), as well as its audited financial statements for 2011 prepared under IFRS.
Moody's decision to place Rosprombank's ratings on review for downgrade reflects the rating agency's concerns regarding the sustainability of the bank's commercial franchise and financial fundamentals in light of the continuing problems at Rosprombank's controlling shareholder - Cyprus Popular Bank Public Co Ltd. Indeed, Moody's on 14 January 2013 has downgraded Cyprus Popular Bank ratings to Caa2 negative (deposit ratings and outlook) and E/ca (BFSR/standalone credit strength).
While Moody's understands that Rosprombank had no credit exposure to Cyprus Popular Bank (including Cypriot and Greek securities) at YE2012, and its reliance on parental funding was low, the rating agency considers that the following risks could materialise for Rosprombank in the short- to medium-term:
(1) Potential volatility in customer deposits, which could be triggered by negative news related to the parent bank. We note that Rosprombank has a somewhat concentrated funding base, with the top-20 depositors accounting for around one-third of total deposits at YE2012 (excluding subordinated debt). According to monthly RAS statements, the bank's retail deposits have shown some volatility in 2012.
(2) While Rosprombank's credit exposure (including off balance sheet) to Cyprus Popular Bank was zero at YE2012, both banks have a history of conducting large intragroup transactions. Moody's does not exclude that such transactions could occur in the future, potentially leading to higher risks for Rosprombank.
(3) Uncertainty regarding future strategy and business development. In early 2011, Cyprus Popular Bank entered into an agreement with the remaining shareholders of Rosprombank, with the goal to increase its participation at the Russian bank close to 100%, from 51% at present.
Moody's understands that the transaction is not proceeding, which could lead to Cyprus Popular Bank's lower strategic interest in its Russian operations.
FOCUS OF THE REVIEW
The review will focus on the credit implications that the continuing problems at Cyprus Popular Bank might have on Rosprombank, as well as on the business and commercial ties between the subsidiary and the parent bank. Rosprombank's ratings could be downgraded if the ratings agency perceives that risks stemming from Cyprus Popular Bank are material enough to negatively affect the Russian banks' business franchise, liquidity, asset quality and profitability.
The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Headquartered in Moscow, Russia, Rosprombank reported total assets of
RUB8.7 billion (around $280 million) and total shareholders' equity of RUB 993 million (around $32 million) at Q3 2012 (under RAS, unaudited).
Company — Rosprombank
Full nameCommercial Bank ROSSIYSKY PROMYISHLENNY BANK"