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Fitch Ratings Affirms VTB Bank Armenia At 'BB+' And ACBA-Credit Agri

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  • Fitch Ratings Affirms VTB Bank Armenia At 'BB+' And ACBA-Credit Agri

    FITCH RATINGS AFFIRMS VTB BANK ARMENIA AT 'BB+' AND ACBA-CREDIT AGRICOLE BANK AT 'BB'

    PanARMENIAN.Net
    04.05.2009 15:02 GMT+04:00

    Fitch ratings has on April 30 affirmed two Armenian banks, VTB Bank
    Armenia (VTBA) and ACBA-Credit Agricole Bank (ACBA), at Long-term
    Issuer Default (IDR) 'BB+' and 'BB', respectively.

    The outlooks on both banks are Stable. The Individual Ratings of VTB
    A and ACBA have been also affirmed at 'D/E' and 'D', respectively. A
    full list of rating actions is provided at the end of this commentary.

    The IDRs of both banks reflect Fitch's view of the moderate probability
    of support being forthcoming, if required, from their owners. Fitch
    believes Russia's JSC VTB Bank (VTB; 'BBB'/Negative) would have a
    strong propensity to support VTB A, in case of need, due to its 100%
    ownership, the strategic importance of CIS markets for VTB and the
    small size of VTB A relative to its parent.

    In respect to ACBA, the probability of support being forthcoming
    from Credit Agricole (CA; 'AA-' (AA minus)/Stable) is undermined by
    CA's minority stake (28%) and the fact that the Armenian market does
    not appear to be of high importance for CA; these considerations
    are reflected in the lower Long-term IDR of ACBA, relative to VTB
    A. Nevertheless, support is factored into the ratings of ACBA due to
    brand association, the close involvement of CA in establishing and
    supervising ACBA and ACBA's relatively small size.

    The Individual Ratings of both banks reflect rapid loan growth in
    recent years, the high proportion of foreign currency loans and
    the high-risk operating environment, but also take into account
    the solid capitalisation of both banks and their broad domestic
    franchises. However, the high concentration of VTB A's loan book, its
    relatively high exposure to the vulnerable construction sector, the
    somewhat higher current loan impairment level, larger tier 2 component
    in capital and much higher reliance on shareholder funding/liquidity
    support make the bank weaker on a standalone basis, which is reflected
    in its Individual Rating of 'D/E'. The Individual Rating of ACBA at
    'D' considers the high granularity of its loan portfolio, diversified
    funding base and stable liquidity position, high profitability and
    good corporate governance.

    ACBA is Armenia's largest bank by assets and loans, with market shares
    of 12% and 13%, respectively, at end-2008. It has a leading position
    in agricultural lending with a 71% market share. The biggest stake
    in the bank is owned by CA and the remainder is distributed among 10
    regional agricultural unions.

    VTBA held 11% of sector loans and 5.9% of retail deposits at
    end-2008. The bank has an extensive branch network covering all
    regions of Armenia and is 100%-owned by VTB, finchannel.com reported.
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