PRIME-TASS. International rating agency Standard & Poor’s (S&P) has assigned credit counteragent ratings (long-term (B-) and short-term (С)) to Moscow-based Federal Bank for Innovations and Development. Both ratings carry a negative outlook. At the same time the lending institution received a national scale rating of ruBBB-, S&P pointed out in a press release.
“Heightened systemic risks that are quite noticeable amid market shocks and the deteriorating economic environment in Russia depressed the bank’s ratings," S&P credit analyst Victor Nikolsky pointed out.
Furthermore, limiting factors are increasing credit risks exacerbated by the high concentration of funds lent to specific sectors and borrowers, the midsized and limited scope of the bank’s network and also weak diversification of its resource base, with funds held on demand accounts prevailing. Along with these negative factors the agency took into account adequate liquidity and capitalization positions, the modest market risk, the stable base of clients that remain loyal to the bank amid instability on financial markets.
The ratings given are reflective of the financial institution’s creditworthiness as a standalone business unit and do not include markups for possible emergency support in critical conditions.
“The negative outlook reflects a potentially negative influence of the worsening business conditions in Russia on financial and operating indicators of the company," Nikolsky emphasized.
Although the ratings assigned take into account high cyclicity of the resource base, as a substantial decline in the bank’s liquidity could cause their downgrade. In addition, the ratings could be negatively impacted by considerable deterioration of the quality of the lender’s assets and its margins.
The rating upgrade is unlikely in the short term. Until concerns subside in the banking sector the bank will be unable to prove its ability to maintain steady financial indicators.
Federal Bank for Innovations and Development is a midsized lending institution. In terms of assets (Rub 5.8 bln or $198 mln as of December 31, 2008) the bank was a Top 300 lending institution. The lending institution’s main clients are small and midsized enterprises engaged in trade, leasing and manufacturing activities.
