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Fitch Assigns Dalcombank ‘B-’ Rating; on Rating Watch Positive

December 19, 2007 | Сbonds

Fitch Ratings has today assigned Russia's Dalcombank (DCB) ratings of Long-term Issuer Default (IDR) 'B-' (B minus), National Long-term 'BB- (BB minus)(rus)' Short-term IDR 'B', Individual 'E' and Support '5'. The Long-term IDR, National Long-term and Support ratings are on Rating Watch Positive (RWP).

DCB’s Long- and Short-term IDRs and National Long-term rating reflect the potential support from the largest shareholder of the bank, Sistema JSFC (Sistema, rated ‘BB-’ (BB minus/Stable outlook), which has acquired a 48% stake in DCB.

The RWP reflects the planned increase of Sistema’s stake in DCB to close to 100% in early 2008. If and when the transaction is completed, DCB’s Long-term IDR, Support and National Long-term ratings will be revised to reflect the increased probability of support forthcoming for the bank, in case of need, with the Long-term IDR probably to be upgraded to ‘B+’.

DCB’s Individual rating reflects its undercapitalisation, high concentration risk, the poor quality of the loan book, weak profitability and vulnerable liquidity. Improvement in most of these areas would be needed to generate upside potential for the rating, but an improvement in the capital position, asset quality and liquidity are of particular importance. Fitch notes that Sistema plans to provide RUB1bn of capital in the form of subordinated loans in December 2007-January 2008, which could significantly strengthen DCB’s core capital if, as planned, they are converted into equity in H208. Fitch notes that the completion of the acquisition should also notably improve DCB’s funding flexibility.

DCB is a small-sized Russian bank based in Khabarovsk and with a broad presence in other regions of the far east of Russia. The bank is engaged in both corporate and retail lending, with the latter growing very rapidly.

Company: Dalkombank

Full company name
Country of riskRussia
Country of registrationRussia
IndustryBanks

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