August 01, 2012 |
|Fitch Ratings-London/Moscow-31 July 2012: Fitch Ratings has affirmed the Long-term Issuer Default Ratings (IDRs) of International Bank of Saint Petersburg (IBSP) at 'B-' with a Stable Outlook.|
RATING ACTION RATIONALE AND RATING DRIVERS
The affirmation of IBSP's ratings at their current level reflects the bank's weak capital position and low asset quality, narrow franchise, concentrated balance-sheet, corporate governance concerns and material illiquid non-core assets. The ratings also take into account IBSP's comfortable liquidity position.
IBSP reported non-performing loans (NPLs; loans more than 90 days overdue) at a low 2.4% of the end-2011 loan book, however, this should be considered together with the high 19.3% share of restructured and rolled-over exposures. At the same time, the loan impairment reserves (LIR) comprised only 8% of gross IFRS loans at end-2011, while under local GAAP the bank's capitalisation allowed this to be increased to only 8.6% before the regulatory capital ratio would decrease to 10%. This is a limited buffer, in Fitch's view, given the uncertain prospects of the restructured exposures, as well as the concentrated loan book (the top 20 exposures accounted for 47% of gross loans at end-Q112) being largely unseasoned (most of them have bullet repayments).
Furthermore, capitalisation is undermined by material property investments (11% of Fitch core capital; FCC) and certain interbank placements (91% of FCC) which, Fitch believes, may be fiduciary in nature. Fitch is also concerned about the high level of real estate and construction exposure (269% of FCC) and related party lending (207% of FCC) at end-2011, although the latter should have reduced considerably in H112 following the sale of exposures to leasing group Interleasing.
IBSP's concentrated funding base (the top 20 names represented 69% of customer accounts at end-Q112) is short term and potentially volatile. Mitigating this to a degree, the bank had a significant liquidity cushion (cash and equivalents, liquid securities and short-term interbank loans net of restricted placements), which covered 27% of customer accounts at end-5M12.
IBSP's ratings may be downgraded if asset quality and capitalisation deteriorate significantly. Upward pressure on the ratings could result from higher business diversification, and improved quantum and quality of capitalisation.
The rating actions are as follows:
Long-term foreign currency IDR: affirmed at 'B-', Outlook Stable
Short Term IDR: affirmed at 'B'
Long-term local currency IDR: affirmed at 'B-', Outlook Stable
Viability Rating: affirmed at 'b-'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
National Long-term rating: affirmed at 'BB-(rus)', Outlook Stable
|Full company name||International Bank of Saint Petersburg|
|Country of risk||Russia|
|Country of registration||Russia|