Reuters logo
Fitch Downgrades Pasha Bank to 'B+' on Reassessment of Sovereign Support
May 26, 2017 / 4:31 PM / 6 months ago

Fitch Downgrades Pasha Bank to 'B+' on Reassessment of Sovereign Support

(The following statement was released by the rating agency) MOSCOW, May 26 (Fitch) Fitch Ratings has downgraded Azerbaijan-based Pasha Bank's (PB) Long-Term Issuer-Default Rating (IDR) to 'B+' from 'BB-'. Fitch has also downgraded the National Long-Term Rating of PB's Turkish subsidiary, Pasha Yatirim Bankasi A.S. (PBTR), to 'BBB+(tur)' from 'A(tur)'. The Outlooks on both ratings have been revised to Stable from Negative. A full list of rating actions is available at the end of this rating action commentary. KEY RATING DRIVERS The downgrade of PB's Long-Term IDR and Support Ratings is driven by the default of International Bank of Azerbaijan (IBA; 'Restricted Default') on its foreign currency non-deposit obligations (See 'Fitch Downgrades International Bank of Azerbaijan to 'RD'' on 24 May 2017 on In Fitch's view, the default of IBA, which is the largest bank in the country and government-owned, means that state support for less systemically-important, privately-owned banks cannot be relied upon. Accordingly, we have revised PB's Support Rating Floor downwards to 'No Floor' and downgraded the bank's Long-Term IDR to 'B+', which now reflects Fitch's view of PB's intrinsic strength, as expressed by the bank's Viability Rating (VR) of 'b+'. Fitch still views PB's systemic importance as significant, as the bank is a part of the largest privately-owned banking group in the country, and together with its sister bank Kapital Bank holds around 15% of sector deposits. Fitch also acknowledges the benefits of PB being ultimately owned by a structure closely connected to the Azerbaijani authorities. However, Fitch's assessment of the track record of sovereign support for the banking sector as a whole as negative is now critical for the determination of the bank's SRF. The previously Negative Outlook on PB's IDR reflected that on the Azerbaijan sovereign. The Stable Outlook is now based on the relative stability of PB's intrinsic credit profile (which now drives the IDR) and our expectations for limited changes to the bank's performance and other financial metrics in the next 12-18 months. PBTR's National Rating is driven by potential support from the parent, PB, which owns 99.9% of PBTR's shares. The downgrade of PBTR's National Rating is driven by the downgrade of PB's Long-Term IDR. The Stable Outlook on PBTR mirrors that on PB. Fitch's view on the probability of support for PBTR considers favourably, in addition to ownership, (i) the strategic importance of the subsidiary to its shareholder and its close integration, (ii) the sizable equity injection already made into PBTR, and (iii) the two banks' common branding. However, the support assessment also considers (i) PBTR's current rapid growth from a low base and gradually increasing leverage, which could make the potential cost of any future support more significant; (ii) PBTR's limited record of operations; and (iii) the cross-border nature of the parent-subsidiary relationship. PBTR's asset quality metrics are so far strong; however, the book is unseasoned. PBTR's Fitch Core Capital ratio was a high 45% at end-1Q17, reflecting large initial capital injections made by PB. RATING SENSITIVITIES IDRS, SUPPORT RATING AND SUPPORT RATING FLOOR Downside pressure on PB's IDRs could result from a marked weakening of the bank's asset quality and capitalisation. Upside for PB would probably require a stabilisation of the operating environment, stronger asset quality and continuation of the currently high capital ratios. PBTR's National Long-Term Rating and Outlook are primarily sensitive to changes in PB's Long-Term IDR and Outlook. PBTR's rating could also be affected should Fitch change its view on PB's commitment to PBTR or assign a VR to PBTR. A VR may be assigned in case of a longer track record of operations, a deeper stand-alone franchise and lower dependence on PB's funding. The rating actions are as follows: Pasha Bank Long-Term IDR: downgraded to 'B+' from 'BB-'; Outlook Stable Short-Term IDR: affirmed at 'B' Viability Rating: 'b+', unaffected Support Rating: downgraded '5' from '3' Support Rating Floor: revised to 'No Floor' from 'BB-' Pasha Yatirim Bankasi A.S. National Long-term Rating: downgraded to 'BBB+(tur)' from 'A(tur)'; Outlook Stable Contact: Primary Analysts Dmitri Vasiliev (PB) Director +7 495 956 5576 Fitch Ratings CIS Limited 26 Valovaya Street Moscow 115054 Aslan Tavitov (PBTR) Director +44 20 3530 1788 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analysts Maria Kuraeva (PB) Associate Director +7 495 956 5575 Aurelien Mourgues (PBTR) Analyst +44 20 3530 1855 Committee Chairperson James Watson Managing Director +7 495 956 6657 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here National Scale Ratings Criteria (pub. 07 Mar 2017) 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. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. 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

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below