International rating agency S&P Global Ratings has lowered its outlook for Mezhtopenergobank's ratings from stable to negative, and affirmed the bank's long-term and short-term counterparty credit ratings at B-/C, S&P said in a press release.
At the same time, the agency reduced the lender's national scale ratings from ruBBB to ruBBB-.
The downgrade of Mezhtopenergobank's rating outlook reflects the agency's opinion that over the next 12-18 months the bank's creditworthiness indicators will most likely come under pressure owing to the deteriorating asset quality and an increase in loan provisions. Since the beginning of 2016 the share of bad debt in the bank's credit portfolio has increased to 7.36% as of June 30, 2016 compared to 3.91% in late 2015. Provision-related expenses rose from -1.57% of the credit portfolio in 2015 to 3.98% in the first half of 2016, said the press release.
Analysts believe that a positive rating action is unlikely at the moment. Such action will be possible in case of a substantial improvement in the bank's credit portfolio quality, strengthening of capital base, improvements in the system and practices of risk management, S&P concluded.
