Russia-Based Investtradebank Ratings Lowered To 'R' Because The Bank Is Under Regulatory Supervision
September 2, 2015 Standard & Poor's
MOSCOW (Standard & Poor's) Sept. 1, 2015--Standard & Poor's Ratings Services said today that it had lowered its long- and short-term counterparty credit ratings on Russia-based Investtradebank JSC to 'R/R' from 'B/B' and the Russia national scale ratings on Investtradebank to 'R' from 'ruBBB+'. We do not assign outlooks to regulatory supervision ratings.
The downgrade reflects the regulatory risk related to the Central Bank of Russia's (CBR's) intervention and the Deposit Insurance Agency's (DIA's) involvement and possible--though not certain--introduction of a moratorium on some of Investtradebank's credit obligations. On Aug. 28, 2015, the CBR assigned the DIA to be temporary manager of Investtradebank and to develop a plan for its financial rehabilitation.
We are not aware of any details of the rehabilitation plan as of this publication, although it is possible that the regulator will prioritize some of the bank's credit obligations over others. We therefore lowered our ratings on Investtradebank to 'R' (indicating the obligor is under regulatory supervision), as per our criteria.
In addition, we believe that the bank could breach the prudential capital and liquidity norms that the CBR has set. Since the beginning of 2015, Investtradebank has created additional provisions of Russian ruble (RUB) 2.3 billion (approximately US$34 million as of this publication), the major part of which was created over last two months at the CBR's request. As a result, as of Aug. 1, 2015, Investtradebank's regulatory capital had decreased to RUB14.4 billion and its regulatory capital adequacy ratio was 10.44% (very close to the regulatory minimum of 10%).
Investtradebank's liquidity risks also increased in August when the information on the creation of additional provisions was made public. The bank faced problems in the Ivanovo region, where an outflow of deposits exceeded RUB2 billion and eroded the bank's liquidity cushion.
Any further rating actions on Investtradebank will largely depend on the details of the rehabilitation procedure to be implemented by the DIA and on our opinion of the bank's business and financial prospects once these details are available and after the financial rehabilitation plan has been implemented.
There are several options that the DIA might chose to resolve the issues at Investtradebank, including the following:
• A total or partial sale to a strategic investor that is willing to take over the bank;
• Long-term management under the DIA rehabilitation plan if there is no investor interest; and
• A run-off of the bank's operations if it appears that its business model is not viable.
Company — Investtorgbank
Full nameJoint-Stock Commercial Bank "Investment Trade Bank" (Open Joint-Stock Company)"