Fitch Downgrades Kedr's Viability Rating to 'f'; Withdraws Ratings
April 10, 2015 Fitch Ratings
Fitch Ratings-Moscow-09 April 2015: Fitch Ratings has downgraded Russia-based JSC CB Kedr's Viability Rating (VR) to 'f' from 'b-' and removed it from RWN. The bank's other ratings, including its Long-term Issuer Default Ratings (IDRs) of 'B-''/Rating Watch Negative (RWN), were unaffected by this action.
At the same time, Fitch has withdrawn Kedr's ratings as the bank has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide ratings or analytical coverage for Kedr.
Fitch placed Kedr's ratings on RWN on 3 December 2014. The rating action reflected the risk that some of the bank's creditors may suffer losses and/or temporary loss of access to funds as a result of the rehabilitation measures initiated by the Central Bank of Russia (CBR) with respect to the group of banks headed by Bank Rost, including Kedr.
On 10 December 2014, CBR and the state Deposit Insurance Agency (DIA) chose B&N Bank as the new controlling shareholder for the group. On 17 December 2014, B&N Bank acquired a controlling stake in Kedr. However, Kedr was managed by DIA until 25 March 2015, when new managers were appointed by B&N Bank to Kedr's board and its management team.
KEY RATING DRIVERS - VR
The downgrade of the VR to 'f' reflects Fitch's view that the bank has failed, after its weak capital position led to regulatory forbearance. At end-February 2015, Kedr's total and core tier one regulatory capital ratios were 2.4% and 2.3%, respectively, significantly below the required minimums of 10% and 5%.
B&N Bank has informed Fitch that Kedr's capital will likely be replenished by end-1H15 as a result of the disposal of most problem and non-core assets. Management estimates that this could result in Kedr's total capital ratio increasing to 14%.
KEY RATING DRIVERS - IDRS AND NATIONAL RATING, SUPPORT RATING AND SUPPORT RATING FLOOR
Fitch has withdrawn Kedr's other ratings without resolving the Rating Watch or affirmation due to insufficient information to assess the other aspects of the bank's current and future credit profile besides capitalisation. Fitch believes it is likely that Kedr's credit profile will become more aligned with that of B&N Bank, which it does not rate.
Kedr has continued to service its obligations following the initiation of rehabilitation measures and has not defaulted. Kedr faced sizable deposit outflows in December 2014, but these were offset by a RUB3.9bn loan from B&N Bank, using funds provided by DIA.
The rating actions are as follows:
Long-term foreign and local currency IDRs: 'B-' on RWN; withdrawn
Short-term foreign currency IDR: 'B' on RWN; withdrawn
National Long-term Rating: 'BB-(rus)' on RWN; withdrawn
Viability Rating: downgraded to 'f' from 'b-'; off RWN; withdrawn
Support Rating: '5'; withdrawn
Support Rating Floor: 'No Floor'; withdrawn.
Company — Kedr Commercial Bank
Full nameKEDR Public Joint-Stock Company Commercial Bank