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Fitch Assigns Credit Bank of Moscow's Perpetual AT1 Notes Final 'B-' Rating
May 2, 2017 / 12:03 PM / 7 months ago

Fitch Assigns Credit Bank of Moscow's Perpetual AT1 Notes Final 'B-' Rating

(The following statement was released by the rating agency) MOSCOW, May 02 (Fitch) Fitch Ratings has assigned CBOM Finance PLC's USD700m 8.875% perpetual additional Tier 1 (AT1) notes a final long-term rating of 'B-'. CBOM Finance PLC, an Irish SPV issuing the bonds, will on-lend the proceeds to Russia's Credit Bank of Moscow (CBM), rated Long-Term Local- and Foreign-Currency Issuer Default Ratings (IDRs) 'BB'/Negative, Short-Term Foreign-Currency IDR 'B', Viability Rating (VR) 'bb', Support Rating '5' and Support Rating Floor 'No Floor'. The assignment of the final rating follows the completion of the issue and receipt of documents conforming to the information previously received. The final rating is the same as the expected rating assigned on 19 April 2017 (see 'Fitch Rates Credit Bank of Moscow's Upcoming Perpetual AT1 Notes 'B-(EXP)' at www.fitchratings.com). KEY RATING DRIVERS The notes are rated four notches lower than the bank's 'bb' VR, the maximum rating under Fitch's Global Bank Criteria that can be assigned to deeply subordinated notes with fully discretionary coupon omission issued by banks with a VR anchor of 'bb'. The notching comprises: (i) two notches for higher loss severity relative to senior unsecured creditors; and (ii) a further two notches for non-performance risk, as CBM has an option to cancel at its discretion the coupon payments. The latter is more likely if the capital ratios fall to minimum required levels including buffers, although this risk is somewhat mitigated by CBM's reasonable internal capital generation capacity and its general policy of maintaining some headroom (about 150bp) over minimum capital ratios. The notes have no established redemption date. However, CBM will have an option to repay the notes after the first coupon reset date (in 2022) subject to approval from the Central Bank of Russia. RATING SENSITIVITIES The issue rating could be upgraded if CBM's VR was upgraded (currently unlikely given the Negative Outlook). If the VR was downgraded to 'bb-', the notes could be affirmed, reducing the notching to three notches, provided the non-performance risk is sufficiently constrained. However, Fitch may widen the notching if non-performance risk increases, for example, if CBM fails to maintain reasonable headroom over the minimum capital adequacy ratios (including the buffers) or if the instrument becomes non-performing, ie if the bank cancels any coupon payment or at least partially writes off the principal. In such a case, the issue would be downgraded based on Fitch's expectations about the form and duration of non-performance. Contact: Primary Analyst Alexander Danilov Senior Director +7 495 956 2408 Fitch Ratings Moscow Valovaya Str, 26 Moscow Secondary Analyst Dmitri Vasiliev Director +7 495 956 5576 Committee Chairperson Olga Ignatieva Senior Director +7 495 956 6906 Date of relevant committee: 13 April 2017 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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