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Russia-Based SB Bank Downgraded To 'CCC' On Increasing Liquidity Risk; Ratings On CreditWatch Negative

January 22, 2015 Standard & Poor's
MOSCOW (Standard & Poor's) Jan. 22, 2015--Standard & Poor's Ratings Services said today that it has lowered its long-term foreign and local currency counterparty credit ratings on Russia-based Commercial Bank Sudostroitelny Bank LLC (SB Bank) to 'CCC' from 'B-' and its Russia national scale rating to 'ruB-' from 'ruBBB'. We placed these ratings on CreditWatch with negative implications.

At the same time, we affirmed our 'C' short-term counterparty credit rating on SB Bank.

We believe that SB Bank is facing liquidity risks driven by outflows of retail and corporate clients' funds, which in our view have been exacerbated by pressure on the ruble and on the Russian economy overall, especially since December 2014. We believe counterparty confidence may have significantly reduced for SB Bank and we think that market turbulence is set to continue for Russian banks in 2015. We also note that SB Bank's funding profile had already deteriorated over 2014 and that its share of pledged securities had increased to about 80% as of Dec. 1, 2014, therefore reducing possibilities to support the bank's liquidity position.

We see a high and increasing probability of regulatory intervention to prevent a deeper liquidity crisis and protect the viability of the bank, unless a unforeseen positive development takes place. This view is consistent with a 'CCC' category rating, which, according to our criteria, reflects the situation of an obligor vulnerable to nonpayment and dependent upon favorable business, financial, and economic conditions to meet its financial commitments. We are also lowering our assessment of the bank's liquidity position to "weak."

To resolve the CreditWatch, we will look at SB Bank's ability to restore its liquidity position and its contingency plans. We expect to resolve the CreditWatch within three months, as soon as we have greater clarity on the liquidity situation, potential support from shareholders and partners, and regulatory actions. We may lower the ratings by up to two notches--to the 'CC' category--if such support appears insufficient or absent. In this case, we would likely consider that default would be a virtual certainty in the coming months.
  • Full name
    Commercial bank "Sudostroitelny bank" (LTD)
  • Registration country
  • Industry