Fitch Ratings agency disconcerted Lukashenko
International rating agency Fitch on Thursday confirmed the long-term Issuer Default Ratings (IDRs) of seven major Belarusian banks - Belgazprombank, Belarusbank, Belinvestbank, Belvnesheconombank, BPS-Bank "VTB Bank Belarus" and BTA Bank (Belarus), rating outlooks remained negative, according to the agency's report.
Ratings of Belgazprombank, Belarusbank, Belinvestbank, Belvnesheconombank, BPS-Bank and "VTB Belarus" affirmed at "B-" level, BTA Bank (Belarus) - at the level of "CCC".
Negative outlooks reflect the weak creditworthiness of banks, the business environment in Belarus and the country's sovereign loan profile.
"The last factor limits the extent to which Fitch considers the potential government support in the ratings of state-owned Belarusbank and Belinvestbank. In addition, this factor determines the limitations associated with the transfer and convertibility risks that may hinder the ability of all banks, including financial institutions with sufficient strong foreign (Russian) shareholders, to service their obligations", the release says.
According to Fitch, the the assets' quality of the Belarusian banking system may continue to deteriorate in the short to medium term due to the serious economic and currency crisis in 2011, a test time of bank portfolios and the current high interest rates. Moreover, the situation with a market capitalization of many banks at present is complicated due to inflation of assets, weighted for risk and deferrals of capital contributions, which limits the ability of banks to absorb losses.
At the same time, Fitch expects, that the increased levels of impaired loans for the reporting will be gradual, taking into account a significant proportion of long-term loans, state subsidies on interest payments for a large number of borrowers and the willingness of banks in many cases to restructure loans to borrowers experiencing difficulty.
"High inflation also reduces the real cost of borrowing firms and households in the national currency, which should support the maintenance of loans, as interest rates are moderate. Liquidity of the banking system remains comfortable, as in general they managed to avoid the outflow of deposits, despite the fact that in-funding is still available from the state, and the foreign debt to third parties is limited", the release says.
Fitch Ratings believes that the ability of Belarusbank to absorb losses is significantly higher than that of other banks. Long-term IDR of Belarusbank and Belinvestbank are taking into account the Fitch's view about the high readiness of Belarusian authorities to support these banks. At the same time, the state's ability to provide support, according to the agency, is limited, and the agency notes that Belinvestbank has not received much support in the form of capital contribution after the crisis began, so its capacity to absorb losses is moderate.
Credibility of BPS Sberbank (the owner is Savings Bank of Russia with a rating of "BBB"), Belgazprombank (OAO "Gazprom", "BBB"), Belvnesheconombank (Vnesheconombank, "BBB") and VTB Bank (Belarus) (VTB, "BBB") get advantage of the high, according to Fitch, willingness of the Russian owners to provide support when needed.
At the same time, the banks' ratings are constrained by banks' increased transfer and convertibility risks in the Republic of Belarus. Belvnesheconombank and Belgazprombank have already received support from the parent structures in the form of contributions to capital in 2011, and 2012 they expect or have already received additional infusions of capital. This provides Belvnesheconombank and Belgazprombank with a lot more significant "safety cushion" to absorb losses while the conducting assessments of capital in BPS-Sberbank and VTB Bank (Belarus) has yet to be.
Long-term IDR at "CCC" level of BTA Bank (Belarus) is connected with its weak creditworthiness on an autonomous basis. BTA Bank (Belarus) does not currently comply with the minimum regulatory capital requirements (11 million euros needed while 25 million euros are needed), but, like other Belarusian banks non-complying with this standard, has a permit from the National Bank of Belarus on its failure till the end of 2012 .
The bank's client base is narrow, and the quality of assets is potentially vulnerable. At the same time, capital ratios to date are relatively high.
Belarusian banks' ratings may be downgraded to a deterioration in case of sovereign creditworthiness in the future, which would reduce the state's ability to provide support for Belarusbank and Belinvestbank and even more would increase the risk of restrictions that could adversely affect the ability of banks to service their obligations. At the same time, the outlook on the ratings can be changed to "stable" in the case of improving sovereign creditworthiness and continued stabilization of the economy, the report says.
In early August 2011 Fitch downgraded the long-term IDR of Belgazprombank, Belarusbank, Belinvestbank, Belvnesheconombank, BPS-Bank and "VTB Belarus", Outlook on the ratings was "negative". Ratings of the banks downgraded by one notch - to "B-" from "B". The agency then also downgraded the ratings of BTA Bank (Belarus) to "negative" from "stable", confirming the rating of "B-". Forecasts have been degraded in March 2011.