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Russian Krayinvestbank Affirmed At 'B/B' And 'ruBBB+' On Expected Capital Injection; Outlook Remains Negative

August 12, 2015 Standard & Poor's
MOSCOW (Standard & Poor's) Aug. 11, 2015--Standard & Poor's Ratings Services said today that it had affirmed its 'B/B' long- and short-term counterparty credit ratings on Russia-based Krayinvestbank. The outlook is negative. At the same time, the 'ruBBB+' Russia national scale rating was affirmed.

We affirmed our ratings on Krayinvestbank based on our expectations that the bank will reduce its real estate exposure and that the regional government will inject capital into the bank in 2016, both of which we view as critical steps to stabilizing the bank's business and financial profiles at a time when economic and industry risks remain elevated in Russia.

The negative outlook reflects the challenges Krayinvestbank faces due to the deteriorating operational environment in Russia, which puts pressure on its capitalization and asset quality.

A negative rating action is likely if Krasnodar Krai's administration fails to commence the capital injection process before the end of 2015, since we consider capitalization will continue to erode throughout 2015. A decline in our projected RAC ratio to below 5%, owing to higher-than-expected credit costs or losses stemming from the real estate assets, could also result in a downgrade.

A positive rating action or revision of the outlook to stable is likely only if we see stabilization of the operational environment in Russia. Nevertheless, we may revise up our assessment of Krayinvestbank's SACP by one notch if see that the divestment from the real estate assets is successful, with payments ultimately received in cash, and that it enhances the bank's performance.

Company — Krayinvestbank
  • Registration country
    Russia
  • Industry
    Banks