Moody's places TransCreditBank's ratings on review for upgrade
August 23, 2013 Moody's Investors Service
Moody's Investors Service has today placed the Baa3/Prime-3 long-term and short-term foreign- and local-currency deposit ratings as well as Baa3 long-term local-currency debt rating of TransCreditBank (Russia) on review for upgrade. The standalone bank financial strength rating (BFSR) of D- (stable outlook), which is equivalent to a baseline credit assessment (BCA) of ba3 remains unchanged.
Moody's assessment is largely based on the decision announced 1 July 2013 by TransCreditBank's shareholder, Bank VTB, JSC (Baa2 stable, D-/ba3 stable), to merge TransCreditBank with its retail subsidiary bank VTB24 (Baa2 stable, D-/ba3 stable). TransCreditBank had earlier approved the merger at its 28 June 2013 annual shareholder meeting. Moody's assessment is also based on other documents related to the planned merger, information from the bank and its financial statements.
The review for upgrade reflects Moody's expectation that TransCreditBank will be merged into VTB24 in November 2013, as communicated by TransCreditBank's management. As a result, TransCreditBank will cease to exist as a separate legal entity and its assets and liabilities will be fully assumed by VTB24. Following the completion of the merger, Moody's is likely to equalise the risk profile of TransCreditBank and VTB24, due to higher support assumptions for the former.
In line with the integration plan, during the period January-June 2013, TransCreditBank's corporate loan portfolio declined by almost 90% and corporate deposits declined by over 40% as the corporate business was transferred to VTB group entities. The bank expects that its remaining business (mostly dominated by retail operations) will be merged with
VTB24 in November 2013.
WHAT COULD MOVE THE RATINGS UP/DOWN
In Moody's view, the successful completion of TransCreditBank's merger with VTB24 could have positive implications for the former's deposit and debt ratings. TransCreditBank's standalone D- BFSR is unlikely to be upgraded.
TransCreditBank's ratings could be downgraded in case of significant delays and/or setbacks in the integration and merger process.
The principal methodology used in this rating was Global Banks published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Headquartered in Moscow, Russia, TransCreditBank had total assets of approximately RUB417 billion (approximately US$13 billion) and equity of
RUB46 billion (approximately US$1.5 billion), according to the bank's unaudited IFRS financial report at end-Q1 2013. TransCreditBank's main focus is on servicing the needs of its former parent, Russian Railways (the state railroad monopoly) and its subsidiaries, and the location of the bank's branch network enables it to better provide services to its former parent's regional entities and their employees.
Company — TransCreditBank
Full nameTransCreditBank OJSC