Moody's downgrades Bank Soyuz's deposit ratings (Russia) to B2
09.10.2008 - Cbonds
Moody's downgrades Bank Soyuz's deposit ratings (Russia) to B2
The bank's deposit and debt ratings and NSR downgraded to B2 and Baa1.ru and put on review for further downgrade
Moscow, October 09, 2008 -- Moody's Investors Service today downgraded the long-term local and foreign currency deposit ratings and senior unsecured foreign currency debt rating of Bank Soyuz ("Soyuz") to B2 from B1 and put them on review for possible further downgrade. Soyuz's E+ bank financial strength rating (BFSR) was affirmed with stable outlook. Moody's also affirmed the bank's Not Prime short-term local and foreign currency deposit ratings. Concurrently, Moody's Interfax Rating Agency downgraded Soyuz's long-term national scale rating (NSR) to Baa1.ru from A2.ru and put it on review for possible downgrade. Moscow-based Moody's Interfax is majority-owned by Moody's, a leading global rating agency.
According to Moody's and Moody's Interfax ("Moody's"), the B2/Not Prime/E+ global scale ratings reflect Soyuz's global default and loss expectation, while the Baa1.ru national scale rating reflects the standing of the bank's credit quality relative to its domestic peers.
Moody's notes that the downgrade of Soyuz's ratings was triggered by the bank's weakening liquidity profile following its recent significant trading losses, as well as the outflow of a sizeable portion of customer funds. A further outflow of customer accounts, including run of individual deposits, could -- if it occurred in the current stressful environment -- pose a major challenge for Soyuz in the short to medium term, and in the longer term could lead to a shrinkage of the bank's business volumes and a further decline in profitability following rising funding costs. The above considerations and Moody's expectations of prolonged financial stresses for Soyuz prompted the rating agency to put the bank's ratings on review for further downgrade.
According to Moody's, the review of Soyuz's ratings will mainly focus on the bank's ability to improve its liquidity profile and acquire more stable customer funding base, as well as its capacity to cover trading losses by earning received from recurring income sources and to maintain adequate capitalisation levels. Furthermore, given the weakening of credit quality of especially corporates in Russia, Moody's will assess any impact thereof on Soyuz's loan book and on the bank's financial fundamentals.
"Moody's ratings for Soyuz do not incorporate any expectation of support being provided to the bank by its affiliated Basic Element (Basel) group as we cannot be certain about the financial flexibility of this group to provide such support amid the current environment," says Olga Ulyanova, a Moody's Assistant Vice-President/Analyst and lead analyst for Soyuz. "More positively, Moody's notes that the third-party customer funds that have flowed out of the bank in the recent period have been partly replaced by funds from Basel group companies. We are also aware of the public announcements by Soyuz's shareholder that it has initiated the transfer of a subordinate loan in the amount of RUB4.1 billion to the bank's Tier 1 capital, to be carried out during Q4 2008, and also plans an additional capital injection in the amount of RUB5.7 billion to be completed in H1 2009," Ms. Ulyanova adds.
Domiciled in Moscow, Russia, Bank Soyuz reported -- as at 31 December 2007 -- total IFRS assets of USD3.7 billion, total shareholders' equity of USD472 million and a net income of USD42 million.
Issuer profile:
JSCB “Soyuz” (earlier JSCB “Ingosstrakh-Soyuz”, established in 1993) is a large universal commercial bank. It was formed in 2004 as a result of incorporation of 3 banks: Avtogazbank, Sibregionbank and Narodny Bank Sberezheniy to Ingosstrakh-Soyuz bank. General banking license # 2307 granted by the Bank of Russia.
The Bank’s priority activities include organization of bonded debts, trade financing, operations on stock and currency markets, crediting and also rendering retail banking services.
Independent rating, information and analytical agencies include Soyuz bank in top-30 biggest Russian banks. As of 01.01.06 Soyuz bank is on the 28th place in rating of Russian banks regarding own capital and 27th place regarding assets in accordance with “Finance” magazine. Authorized capital of the Bank amounts to 3.1 bn rubles. As of 01.02.2006 the Bank’s own funds amounted to 7.6 bn rubles, assets volume made 52.9 bn rubles.
Standard & Poor’s, international rating agency, assigned the following credit ratings to the Bank: long-term “CCC+”, short-term “C”, outlook “positive”, Russian scale rating “ruBB+”.
JSC “PriceWaterHouseCoopers Audit” audits Russian and IAS financial reporting of Soyuz bank.
Soyuz bank develops actively investment business, corporate, trade financing, operations on stock and foreign exchange markets.
In 2005 volume of the Bank’s operations with securities increased. The Bank showed itself as a bank-organizer and underwriter of bonded debts. In 2005 there were placed bonds of Soyuz bank for the total amount of 1 bn rubles, the rate of the first coupon made 9.65% per annum.
In August 2005 Soyuz bank placed a debut issue of 5-year Eurobonds for $49.8 mln in the context of the first securitization of autoloans in Russia.
Soyuz bank has licenses of a professional participant of stock market, granted by Federal Securities Market Commission, for executing broker, dealer and depositary activities and trust management, license for concluding futures contracts and options.
The Bank was accredited by the Committee of municipal loans and development of stock market of Moscow government as an authorized underwriter and market maker.
In 2005 Cbonds information agency included Soyuz bank in top-10 investment banks. The Bank holds the 4th place regarding quantity of placed issues in combined rating of organizers of bonded debts, 1st place in combined rating of ruble bonds underwriters. The rating of National Securities Association included the Bank in top-15 investment banks-brokers in accordance with the results of 9 months of 2005.
Regional network of Soyuz bank includes regional center-branches in Nizhny Novgorod and Irkutsk, and also branches in St. Petersburg, Miass (Chelyabinsk region), Krasnodar, Krasnoyarsk, credit and cash office in Volgograd. There are 15 offices in Moscow.
