International rating agency S&P Global Ratings has affirmed Svyaz-Bank's long-term and short-term foreign currency and local currency counterparty credit ratings at BB-/B. The ratings carry a negative outlook.
The bank's national scale rating was affirmed at ruAA-, while its Baseline Credit Assessment (BCA) was also left unchanged at b-.
In a press release S&P noted that during a long period of time a main factor producing a positive impact on Svyaz-Bank's operations was loyalty of its biggest clients. For many years the bank has maintained strategic relations with national postal services provider Russian Post. At post offices Svyaz-Bank still acts as an agent. Around 15 mln of Russians (the maximum number of accounts served, or around 10% of the country's population) receive pensions through this channel.
At the same time, analysts expect that these functions will be gradually handed over to Pochta-Bank. As a consequence, the degree of Svyaz-Bank's importance for the Russian banking system was revised from moderate to low, although this does not produce any impact on the issuer's credit ratings because they are backed by S&P's expectations that Vnesheconombank Group will support Svyaz-Bank in the future, the press release specifies. The bank's other rating factors remain the same.
Though VEB plans to spin Svyaz-Bank off the group, the rating agency still believes that the bank's sale is very unlikely over the next 12-18 months given the bank's weak financials and the lack of potential buyers. Svyaz-Bank's sale should be mandatorily agreed upon with the government which is stipulated by VEB's special functions as a state development institution, S&P noted, adding that this factor along with a capital injection of Rub 15.9 bln which is expected until end 2016 gives reasons to believe that Vnesheconombank will continue to provide Svyaz-Bank with timely and sufficient support through liquidity and capital under most predictable circumstances.
The negative outlook for Svyaz-Bank's rating reflects a prospective influence of deteriorating operating conditions in Russia on its financials. The rating agency expects the bank's capitalization and business positions to remain under pressure due to the narrowing scope of business and revenue, and also still high expenses to compile provisions over the next 12-18 months, S&P pointed out.
