Tweet
Russia & CIS Business and Financial Newswire
December 28, 2007 Friday 4:03 PM MSK
Fitch rates Armenia's ACBA-Credit Agricole Enhanced Coverage
Bank CJSC (ACBA) ratings of Long-term Issuer Default (IDR) 'BB' with
Stable Outlook, Short-term IDR 'B', Individual 'D' and Support '3,'
the rating agency said in a press release.
ACBA's ratings reflect the moderate probability of support being
forthcoming, if required, from ACBA's biggest shareholder, Credit
Agricole S.A.
Enhanced Coverage LinkingCredit Agricole S.A. -Search using:
Company Profile
News, Most Recent 60 Days
(CA, Long-term IDR 'AA'/Outlook Stable), the press release says. In
Fitch's view, despite the 28% minority shareholding, CA would have a
moderate propensity to support ACBA, if required, considering the
brand association, the close involvement of CA in establishing and
supervising ACBA and the still very small size of ACBA.
That said, the minority ownership and the fact that the Armenian
market does not appear to be of high strategic importance for CA,
could reduce the probability of support, the press release says. In
light of ACBA's considerable market share in agricultural lending
sector, there is also a limited probability of support being
forthcoming for the bank from the Armenian authorities (Armenia is
rated Long-term foreign and local currency IDR 'BB-'(BB
minus)/Outlook Positive) in case of need.
The Individual rating reflects ACBA's small size by international
standards, a high-risk operating environment, the bank's very rapid
asset growth and a high proportion of foreign currency lending. At
the same time, it takes into account the generally good quality of
management, ACBA's significant domestic franchise, strong core
performance, historically good asset quality, strong capitalization
and adequate liquidity position, the press release says.
Upside potential for the Long-term IDR is currently limited, and
would require an increase in CA's stake in ACBA and/or strong
representations by CA to Fitch concerning its readiness to support
ACBA in case of need. An upgrade of Armenia's Country Ceiling from
its current level of 'BB' would also be a necessary condition for any
upgrade of ACBA's Long-term IDR. Any downward revision of Fitch's
assessment of CA's propensity to support ACBA or a downgrade of
Armenia's Country Ceiling (not anticipated at present in light of the
Positive Outlook on the sovereign ratings) could result in a
downgrade of ACBA's Long-term IDR.
Upside for ACBA's Individual rating is currently limited given its
small size and the high-risk operating environment. However, a
successful further expansion of franchise, combined with maintenance
of the bank's asset quality and adequate capitalization, would be
positive for the bank's stand-alone credit profile. Significant loan
losses would be the major potential source of downward pressure on
the rating, although the equity cushion to absorb these is currently
substantial.
ACBA is Armenia's third-largest bank by assets and loans, with market
shares of 10% and 12%, respectively, as of the end of the third
quarter 2007, and a leading position in agricultural lending with 70%
market share. ACBA is engaged in micro and small financing of the
agricultural sector and SMEs, and retail lending. It operates through
21 outlets in Armenia, which it plans to expand to 47 by end-2009. CA
holds the biggest (28%) stake in the bank, while the remainder is
owned by 10 Regional Unions of Agricultural Cooperation, representing
more than 45,000 farmers.
December 28, 2007 Friday 4:03 PM MSK
Fitch rates Armenia's ACBA-Credit Agricole Enhanced Coverage
Bank CJSC (ACBA) ratings of Long-term Issuer Default (IDR) 'BB' with
Stable Outlook, Short-term IDR 'B', Individual 'D' and Support '3,'
the rating agency said in a press release.
ACBA's ratings reflect the moderate probability of support being
forthcoming, if required, from ACBA's biggest shareholder, Credit
Agricole S.A.
Enhanced Coverage LinkingCredit Agricole S.A. -Search using:
Company Profile
News, Most Recent 60 Days
(CA, Long-term IDR 'AA'/Outlook Stable), the press release says. In
Fitch's view, despite the 28% minority shareholding, CA would have a
moderate propensity to support ACBA, if required, considering the
brand association, the close involvement of CA in establishing and
supervising ACBA and the still very small size of ACBA.
That said, the minority ownership and the fact that the Armenian
market does not appear to be of high strategic importance for CA,
could reduce the probability of support, the press release says. In
light of ACBA's considerable market share in agricultural lending
sector, there is also a limited probability of support being
forthcoming for the bank from the Armenian authorities (Armenia is
rated Long-term foreign and local currency IDR 'BB-'(BB
minus)/Outlook Positive) in case of need.
The Individual rating reflects ACBA's small size by international
standards, a high-risk operating environment, the bank's very rapid
asset growth and a high proportion of foreign currency lending. At
the same time, it takes into account the generally good quality of
management, ACBA's significant domestic franchise, strong core
performance, historically good asset quality, strong capitalization
and adequate liquidity position, the press release says.
Upside potential for the Long-term IDR is currently limited, and
would require an increase in CA's stake in ACBA and/or strong
representations by CA to Fitch concerning its readiness to support
ACBA in case of need. An upgrade of Armenia's Country Ceiling from
its current level of 'BB' would also be a necessary condition for any
upgrade of ACBA's Long-term IDR. Any downward revision of Fitch's
assessment of CA's propensity to support ACBA or a downgrade of
Armenia's Country Ceiling (not anticipated at present in light of the
Positive Outlook on the sovereign ratings) could result in a
downgrade of ACBA's Long-term IDR.
Upside for ACBA's Individual rating is currently limited given its
small size and the high-risk operating environment. However, a
successful further expansion of franchise, combined with maintenance
of the bank's asset quality and adequate capitalization, would be
positive for the bank's stand-alone credit profile. Significant loan
losses would be the major potential source of downward pressure on
the rating, although the equity cushion to absorb these is currently
substantial.
ACBA is Armenia's third-largest bank by assets and loans, with market
shares of 10% and 12%, respectively, as of the end of the third
quarter 2007, and a leading position in agricultural lending with 70%
market share. ACBA is engaged in micro and small financing of the
agricultural sector and SMEs, and retail lending. It operates through
21 outlets in Armenia, which it plans to expand to 47 by end-2009. CA
holds the biggest (28%) stake in the bank, while the remainder is
owned by 10 Regional Unions of Agricultural Cooperation, representing
more than 45,000 farmers.