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28.01.2009
Credit-Rating: International credit ratings do not mirror banks' strength within the domestic market
Credit-Rating agency calls the national analysts for more careful views on the situation in the national economy, including the banking sector. Primarily, the matter is about right interpretation of international rating agency`s messages concerning changes in their international ratings assigned to certain financial institutions.
In fact, the Fitch`s downgrade to CCC of the international ratings assigned to VAB Bank, Kreditprombank, and Ukrgasbank has drawn a wide response. Basing on this information the national analysts have made a conclusion that these banks are on the edge of default. Indeed, considering Ukraine`s country ceiling, the ratings of these banks pertain to one of the lowest grades if compared with other banks in the world. According to Fitch`s classification, this rating exhibits that `default is a real possibility`, albeit the matter is about the banks` foreign currency denominated obligations towards international lenders. At the same time, the strength of these banks within the country and their capacity for meeting their commitments on their national currency denominated obligations are considered much higher. The national ratings assigned to these banks by Fitch are recorded at BB(ukr). This denotes `a fairly weak credit risk relative to other issuers or issues in the same country. Within the context of the country, payment of these financial commitments is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.`
While the national rating of BB is one of the lowest for Ukrainian banks, many financial institutions bear even lower national ratings of CCC and CC. Overall, among 70 Ukrainian banks, which ratings are currently maintained by Credit-Rating, the investment grade ratings are carried by 52 banks, i.e. the share of banks with low speculative grade ratings is 26%. At the same time, the share of speculative grade ratings in the corporate sector is in excess of 65%, specifically that in the construction sector is 88%, in the machine building and metal processing sector is 44%, and in commercial sector is 72%. This shows that, despite growing pressure, the financial institutions remain more resilient to the crisis. Thereat, a large number of negative outlooks on banks` ratings reflects Credit-Rating`s expectations that the situation in the banking sector is likely to deteriorate due to eroded confidence, depreciation of the national currency coupled with maturing foreign currency denominated loans, aggravated borrowers` solvency and absence of efficient regulatory policy.
Information on all credit ratings assigned in accordance with the National Rating Scale may be found in REUTERS and BLOOMBERG information systems.
For more information, please contact:
Information and analytic department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.ua
Denis Rudenko
DRudenko@credit-rating.ua
