(The following statement was released by the rating agency)
July 20 -
Overview
-- JSC Savings Bank Belarusbank’s capitalization has strengthened following a Belarusian ruble 12.9 trillion Tier 1 capital injection by the Belarus government on Dec. 30, 2011.
-- We now assess the bank’s capital and earnings as “weak” instead of “very weak” and its stand-alone credit profile as ‘b’ instead of ‘b-‘.
-- We are affirming our long-term counterparty credit rating on the bank at ‘B-‘, the same level as the long-term sovereign foreign currency credit rating on Belarus.
-- The outlook is stable in line with that on Belarus and reflects the stability of the bank’s business and financial profile, despite difficult operating conditions in Belarus.
Rating Action
On July 20, 2012, Standard & Poor’s Ratings Services affirmed its ‘B-/C’ long- and short-term counterparty credit ratings on JSC Savings Bank Belarusbank. The outlook is stable.
Rationale
The rating action reflects the stability of the bank’s business and financial profile, despite difficult operating conditions in Belarus. The ratings on Belarusbank are constrained by the sovereign foreign currency credit ratings on Belarus, because the bank operates exclusively within the country and remains highly exposed to sovereign-related risk. The bank’s stand-alone credit profile (SACP), at ‘b’, is, however, one notch higher than the rating on Belarus, having improved after a capital increase in late 2011.
Belarusbank’s capitalization has strengthened following a Belarusian ruble 12.9 trillion ($1.5 billion) Tier 1 capital injection by the Belarus government on Dec. 30, 2011. The bank’s risk-adjusted capital ratio, before adjustments for diversification, was 6% at year-end 2011. We project that the ratio will weaken to below 5% in 2012-2013 due to loan growth in line with inflation, weak earnings generation, a lack of further capital injections, and a small dividend payout. The projected level is nevertheless much higher than before the capital increase. Accordingly, we are revising our assessment of the bank’s capital and earnings to “weak” from “very weak” and raising our assessment of its SACP to ‘b’ from ‘b-‘.
We classify Belarusbank as a government-related entity (GRE) under our criteria. However, we do not factor in explicit government support because the long-term rating on the bank is already at the level of the long-term sovereign rating. We believe Belarusbank plays a “very important” role for, and has a “very strong” link with, the government, resulting in a “very high” likelihood of government support in the event of need.
We do not expect any change in Belarusbank’s “very important” role over the next 12-18 months, despite a general reduction of lending under government support programs and the transfer of some lending under these programs to recently created Development Bank (not rated). Belarusbank’s “very strong” link with the government is also unlikely to change, despite a government announcement that it will allow the privatization of a minority stake in the bank, which we consider highly unlikely in current market conditions.
Under our criteria, we use Banking Industry Country Risk Assessment economic risk and industry risk scores to determine a bank’s anchor, the starting point in assigning an issuer credit rating. Our anchor for a bank operating only in Belarus is ‘b-‘. Our ratings on Belarusbank reflect its ‘b-’ anchor. They also reflect its “strong” business position, “weak” capital and earnings, “adequate” risk position, “above average” funding, and “adequate” liquidity, as our criteria define those terms.