BELARUS NEWS AND ANALYSIS

DATE:

12/12/2008

Fitch Rates BTA Bank (Belarus) 'B'; Outlook Negative

Fitch Ratings-London/Moscow-11 December 2008: Fitch Ratings has today assigned Belarus-based BTA Bank (Belarus) (BTAB) Long- and Short-term foreign currency Issuer Default ratings (IDR) of 'B'. The Outlook is Negative. A Support rating of '4' and an Individual rating of 'E' have been assigned.

BTAB's IDR is driven by the potential support in case of need by the bank's ultimate shareholder, Kazakhstan-based BTA Bank (BTA) (Long-term IDR: 'BB' with Negative Outlook). Fitch views BTA's willingness to provide support to its Belarusian affiliate as high due to virtually full ownership, recent consolidation of the latter in BTA's accounts, and the bank's small size relative to BTA. However, the ability to provide such support is constrained by BTA's stand-alone financial strength, as reflected in its Individual 'D' rating, and the potential for the Kazakh authorities to restrict the extent to which local banks can support their foreign subsidiaries.

The 'E' Individual rating reflects BTAB's small franchise and limited track record and the challenging Belarusian operating environment, as well as the concentrated and largely FX-denominated balance sheet and high reliance on interbank funding, predominantly from BTA.

However, BTAB's standalone credit profile is supported by low levels of loan impairment to date, with loans overdue by more than 90 days accounting for a low 0.2% of the gross loan portfolio at end-Q308 (albeit the loan portfolio is unseasoned). BTAB's assets and liabilities are also well-matched by tenors. At end-November 2008 the bank ran positive liquidity gaps in all time baskets on a cumulative basis. In October-November 2008 the bank's customer funding base remained stable, although the high concentration of customer funding makes BTAB's liquidity position potentially vulnerable.

At end-Q308, the bank's tier 1 capital ratio per Basel I was 13.6%. In light of the challenging operating environment in Belarus and high balance sheet concentrations, Fitch views BTAB's current capitalisation as moderate.

The Negative Outlook on BTAB's IDR reflects the potential for further deterioration in BTA's standalone credit strength, and therefore its ability to provide support to BTAB in case of need.

BTAB, formerly Astanaeximbank, was set up in 2002. In 2005, a stake in the bank was acquired by BTA, which increased its direct ownership to 99.3% in Q408. At end-November 2008 BTAB had USD123m in assets, ranking 15th by asset size in Belarus, with a 0.5% market share in system assets.

Source:

http://www.cbonds.info/all/eng/news/index.phtml/params/id/418156

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