The credit ratings service at Standard & Poor’s has revised its outlook for the ratings assigned to Russia-based B&N Bank from stable to developing, while the issuer’s long-term and short-term credit ratings were affirmed at B/B, and the national scale rating at ruA-.
S&P noted that the rating outlook was revised as B&N Bank plans to acquire Moscomprivatbank, a Russian subsidiary of the largest Ukrainian lender PrivatBank, for Rub 6 bln. As the rating agency emphasized, the developing outlook means an equal likelihood of a positive and negative rating action over the next 12 to 18 months. The agency took into account the possible favorable impact of the acquisition on B&N Bank’s performance, but risks as well.
As the agency expects, B&N Bank’s direct costs to acquire Moscomprivatbank will be minimum as the deal will be funded by the money to be raised from the sale of Ukrainian real estate by B&N Bank majority shareholder Mikail Shishkhanov. S&P notes that Moscomprivatbank is a mid-sized lending institution. Its credit portfolio is assessed as highly exposed to the risk (99% of loans are retail credits with overdraft options), but substantial provisions were piled up, and analysts expect no substantial amount of NPLs. Furthermore, the State Depositary Insurance Agency (DIA) provided B&N Bank with Rub 12 bln to cover Moscomprivatbank’s liquidity needs.
The successful integration of Moscomprivatbank, which has high capital positions, and also a planned Rub 4 bln capital uplift at B&N Bank on the part of its future shareholder Mikhail Gutseriev and Rub 5 bln to be given by Mikail Shishkhanov in 2014 will increase B&N Bank’s capitalization, S&P professionals think.
However, problems are also possible, for instance, when taking Moscomprivatbank’s information infrastructure and databases out of relevant entities of the former Ukrainian parent bank. S&P believes that this could result in operating losses or substantial administrative costs in the course of integration.
The rating agency considers Moscomprivatbank’s acquisition to be an opportunistic transaction, but a favorable one from the viewpoint of the price and funding from DIA, S&P gives their assessment of the deal.
The agency’s analysts noted that they have so far had no view to which extent the purchase of this asset complies with B&N Bank’s long-term strategy and whether or not in the course of time this could have a positive impact on risk-adjusted profitability indicators. They admit that “costs related to Moscomprivatbank’s integration could offset any positive effect” from the transaction over the next year and a half.
The rating agency also pointed out that B&N Bank is still exposed to the risks associated with deteriorating operating conditions in Russia.
As a whole, B&N Bank’s ratings reflect “moderate” positions of capital and profitability, and also the “moderate” risk position, “average” indicators of funding and “adequate” liquidity ratios, S&P specified in the press release.
Noteworthy, as Banki.ru learned, Mikail Shishkhanov mulls another acquisition in the banking sector (Murmansk-based DNB Bank, a subsidiary of Norwegian group DNB). This transaction is intended to be executed not through B&N Bank.
