Moody's Interfax Rating Agency has affirmed the long-term national scale credit rating for First Czech- Russian Bank (FCRB) at Baa3 (rus) and the short-term rating at RUS-3.

The rating is defined by support the bank could receive from its shareholders - Czech Consolidation Agency and Stroitransgaz, its high capitalization and liquidity, and the ability to manage liquidity as its biggest clients coordinate their payments with the bank. The rating is constrained by risks related to the rapid growth strategy, narrow market niche, dependence on a small number of big clients, the high concentration of the resource base, and relatively low profitability.

The bank was among the top 40 banks in terms of assets and the top 30 by equity capital as of October 1, 2004, having moved up from 383rd place in the middle of 2002.

The bank works primarily with Stroitransgaz, which accounts for half of the balance on settlement accounts and deposits of enterprises, and nearly a quarter of the loan portfolio. The company is a long-time partner of the bank and became a shareholder in November 2002. The bank also handles operations of the Czech company in Russia and handles about a quarter of Czech export to Russia.

Loans make up a relatively small share of assets at 22.5% as of October 1, which is well below the average in the banking system of 56.6%. The loan portfolio is highly concentrated. The three biggest borrowers account for 68% of the loan portfolio and the 10 biggest account for 84%. The concentration is not as high in relation to assets but the claims on the biggest group of related borrowers to capital is close to the maximum allowed.

The bank maintains very high liquidity. Most of its assets are held in cash, as well as claims on Russian and foreign banks. The claims on Russian banks consist primarily of loans to major banks. This asset structure lowers profitability, which is far lower than at most banks of similar size and results in a higher capital to assets ratio.

Following a charter capital increase the share held by Stroitransgaz dropped from 95% to 86% and the share held by the Czech company grew from 5% to 14%. The Czech company has a two year option to investor further in the bank and establish equal ownership. The bank's participation in key projects of its shareholders should increase possible support from them.

The Baa3 (rus) long-term rating on the Moody's Interfax Rating Agency national scale reflects adequate creditworthiness in comparison to other Russian borrowers. The rating indicates that borrowers can meet financial obligations in favorable conditions, but are vulnerable to negative changes in external conditions.

The short-term RUS-3 rating on the Moody's Interfax Rating Agency national scale signifies a high level of creditworthiness compared to other Russian borrowers/debt.