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January 28, 2008 |
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UKRSOTSBANK OJSC: S&P Lifts Ratings to BB- with Negative Outlook Standard & Poor's Ratings Services raised its long-term counterparty credit rating on Ukraine-based Ukrsotsbank OJSC to 'BB-' from 'B' and removed it from CreditWatch, where it had been placed with positive implications on July 6, 2007. At the same time, the 'B' short-term counterparty credit rating on the bank was affirmed. The outlook is negative. The upgrade follows the acquisition by UniCredito Italiano SpA (A+/Stable/A-1), through its subsidiary Bank Austria Creditanstalt AG (A+/Stable/A-1), of a 94.2 % stake in USB. "USB stands to benefit from this transaction in terms of financial flexibility, business development, and risk management," said Standard & Poor's credit analyst Ekaterina Trofimova. "We consider USB to be a strategically important subsidiary of UniCredito and expect strong parental support in case of need." The long-term rating on USB consequently includes a two-notch uplift from the bank's stand-alone credit quality. The ratings on USB reflect the bank's risky operating environment; rapid loan growth; pressured profitability ratios; tight balance-sheet liquidity; moderate capitalization; and intensified competition in the Ukrainian banking sector. Positive rating factors are support from the new parent, a good commercial franchise, improving diversification of the business mix and earnings, and reduced single-name concentrations. USB is among the top four banks in Ukraine and reported total assets of UAH31 billion (US$6 billion) and a market share of over 5% of the system's assets at year-end 2007. The negative outlook mirrors that on Ukraine (foreign currency BB-/Negative/B; local currency BB/Negative/B), and a downgrade of the sovereign would trigger a similar rating action on the bank. However, should the outlook on the sovereign be revised back to stable, that on the bank would also be revised to stable. Similarly, a raising of the foreign currency sovereign rating would trigger an upgrade of the bank. "We expect that Unicredito's initiatives to optimize and adapt USB's business model, processes, and internal technologies will allow USB to strengthen its commercial and credit position," said Ms. Trofimova. The future direction of the ratings will also depend on the level of financial and operational support provided to USB by its strategic shareholder, but also on the evolution of the bank's risk profile and financial performance. |
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