MOSCOW (Standard & Poor's) Aug. 26, 2008--Standard & Poor's Ratings Services said today that it had affirmed its 'BB' long-term and 'B' short-term counterparty credit ratings on Russian MDM Bank. The outlook is stable.
"The ratings reflect MDM's funding vulnerability due to still high single-name concentrations in customer deposits, its material exposure to the construction and real estate sectors, and its relatively volatile earnings track record," said Standard & Poor's credit analyst Eugene Tarzimanov.
These negative factors are mitigated by MDM's sustained commercial and financial performance, and consistent progress in reducing single-name lending concentrations. These positive developments have been supported by the bank's strategic repositioning and organizational enhancements, adequate risk management, and governance practices, as well as by the improving--albeit still challenging--macroeconomic environment in Russia.
The ratings reflect the bank's stand-alone credit quality, and do not include any uplift for extraordinary external support--either from the owners or the government.
With assets of Russian ruble (RUR) 305 billion ($13 billion) and equity of RUR39 billion ($1.7 billion) as of March 31, 2008, MDM ranks among Russia's top 15 banks by assets. The bank represents only about 1.4% of the system's assets, however, which are dominated by state-owned banks, mainly Sberbank (not rated).
"We believe that MDM's current strategy and related optimization and growth acceleration plan will progress smoothly without setbacks, and improve the bank's customer franchise and diversification of revenues, loans, and funding. MDM's developed infrastructure positions it well to benefit from positive economic trends in Russia," said Mr. Tarzimanov.
An upgrade would depend on the bank's successful execution of its strategic objectives, a longer track record of good financial performance, further reduction in funding concentration, and the maintenance of adequate capitalization.
A negative rating action might occur if the bank's strategy faltered, particularly regarding retail-banking development, or if profitability, asset quality, or capitalization deteriorated significantly. |
