BELARUS NEWS AND ANALYSIS
DATE:
30/01/2009
Fitch Affirms Belagroprombank At 'B-'
Fitch Ratings-London/Moscow-30 January 2009: Fitch Ratings has today affirmed the ratings of Belarus-based Belagroprombank (BAPB), including its Long-term Issuer Default Rating (IDR) of 'B-' (B minus) with a Stable Outlook and its Individual rating of 'D/E'. A full list of the bank's ratings follows at the end of this commentary.
BAPB's IDRs and Support rating of '5' reflect Fitch's view that the Belarusian authorities would have a high propensity to provide support to BAPB in case of need. This view is based on the bank's state ownership, its position in the national banking system and its agency role in developing Belarusian agriculture under government programmes. However, the ratings also reflect constraints on the sovereign's ability to provide potential support, in particular because of the considerable size of the country's state-owned banks and their foreign currency obligations relative to the sovereign's foreign currency reserves. BAPB's Individual rating of 'D/E' reflects the risks arising from the rapid growth of its loan portfolio, high level of industry concentration, weaknesses in the operating environment and a relatively weak liquidity profile. The Individual rating also considers low reported loan impairment to date and the bank's strong capitalisation.
The Stable Outlook on BAPB's Long-term IDR reflects Fitch's view that the sovereign currently retains the ability to provide support to state-owned banks to the extent implied by their 'B-' (B minus) ratings. However, if the Belarusian economy experiences further negative shocks and the sovereign's ability to provide support is significantly reduced, BAPB's ratings could come under downward pressure. Significant deterioration in the operating environment, and weakening of the agriculture sector in particular, would also negatively affect the stand-alone profile of the bank and could put downward pressure on the Individual rating.
BAPB's loan portfolio grew by 73% in 11M08. Agricultural, food processing and other related industries together accounted for 86% of the loan book at end-Q308. At the same time, loans under government programmes accounted for two-thirds of the loan portfolio and 45% of the loan book was covered by government guarantees. Loans overdue for 90 days and above were a low 0.2% of total loans at end-Q308 and were 9x covered by impairment reserves. However, asset quality is likely to deteriorate as a result of the seasoning of the loan book and the weakening operating environment. BAPB's liquidity profile is weakened by reliance on short-term funding to finance long-term loans and a relatively low holding of liquid assets. However, a significant part of BAPB's funding (65% of total liabilities at end-Q308) comes from government authorities and state-controlled entities, which partly mitigates the liquidity risk. Following a BYR1,950bn equity injection from the government in December 2008, year-end regulatory tier 1 and total capital ratios stood at a reasonable 27.2% and 30.3%, respectively, although these should be considered in light of the high-risk lending operations and the unseasoned portfolio.
BAPB is the second-largest Belarusian bank and is majority-owned by the state, mainly via the State Property Committee (70%). At end-2008, BAPB held 25% of system assets, had a 35% market share in corporate lending and an 11% market share of retail deposits.
BAPB's ratings have been affirmed as follows:Long-term foreign currency IDR: affirmed at 'B-' (B minus); Stable Outlook Short-term foreign currency IDR: affirmed at 'B' Support rating: affirmed at '5' Individual rating: affirmed at 'D/E' Support Rating Floor: affirmed at 'B-' (B minus)
Contacts: Svetlana Petrischeva, London Tel: +44 (0) 207 682 7131; James Watson, Moscow, +7 495 956 9901.
Media Relations: Alla Izmailova, Moscow, Tel: +7 495 956 9903, Email: alla.izmailova@fitchratings.com; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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