PRIME. International rating agency Moodys has cut its long-term foreign currency and local currency deposit rating on GE Money Bank (the former Russian subsidiary of US-based General Electric) to B2 from Ba3, a negative outlook, the agency said in a press release.
Also, Moodys downgraded the banks Baseline Credit Assessment (BCA) to b2 from b1, and at the same time the agency affirmed the banks short-term rating of Not Prime and its bank financial strength rating (BFSR) of E+, which carries a stable outlook.
Sovcombank wrapped up the acquisition of GE Money Bank from General Electric on February 7, 2014. As part of the deal Sovcombank should substitute the parent banks funding of around Rub 11 bln at GE Money Bank. In November 2013 Moodys put GE Money Bank on Rating Watch Negative, and the rating downgrade will finalize the process.
The agencys experts note that GE Money Banks risk inclination after the deal is closed could increase, while the capital adequacy ratio, on the contrary, could drop to 12—13% from 20% as of year-end 2013. These factors impacted the decision to downgrade the banks BCA.
“Moodys think that the good liquidity profile of GE Money Bank could weaken as its liquidity to a large extent depended on huge credit lines of GE Capital," the agency added in the press release. The downgrade of deposit ratings also reflects the end of support from GE Capital.
The agency noted that rating upgrades are unlikely in the next 12—18 months. GE Money Banks ratings could be reduced if the banks financial showings deteriorate drastically and also as a result of rating actions with regard to Sovcombank.