Fitch Ratings-London/Moscow-09 October 2008: Fitch Ratings has today downgraded the ratings of Ukraine's Rodovid Bank (RB) to Long-term Issuer Default (IDR) 'CCC' from 'B-' (B minus), Short-term IDR 'C' from 'B', Individual 'E' from 'D/E', and National Long-term 'BB-(minus)(ukr)' from 'BBB-(minus)(ukr)'. At the same time, the agency has placed the IDRs and the National rating on Rating Watch Negative (RWN). Fitch affirmed the bank's Support rating at '5' and Support Rating Floor at 'No Floor'.
Fitch has also downgraded RB's UAH125m Series B and UAH125m Series C notes to 'BB-(minus)(ukr)' from 'BBB-(minus)(ukr)'.
The downgrade and the RWN reflects RB's tightening liquidity position and the significant volumes of short-term interbank funding which are not backed by interbank or other liquid assets of similar maturities. The downgrade also reflects the exceptionally high exposure to a single real estate development project and weaker prospects for the real estate sector in light of the tougher credit environment. Other negatives for RB's credit profile are its exceptionally fast recent growth, moderate asset quality (reflected in significant volumes of restructured loans), low impairment coverage ratios, weak profitability and low capitalisation.
"Fitch is concerned about the bank's ability to extend the maturity of its interbank funding sources in current market conditions in Ukraine," says Zarema Lyanova, Associate Director in Fitch's Bank team. "As the coverage ratio requires strengthening and asset quality may deteriorate with loan book seasoning, we also have concerns about the potential negative impact of larger loan impairment charges on already weak capitalisation and profitability".
The agency expects to resolve the RWN on RB in the near term depending on the evolution of the liquidity position. RB could be downgraded again if liquidity deteriorates further, while an affirmation of the ratings is possible if liquidity and capitalisation improve.
At end-H108, RB was the 19th-largest bank in Ukraine, with an approximate 1% market share by total assets. RB's franchise is focused primarily on lending to mid-sized corporates and retail customers. RB is majority-owned by five individuals. |
