Fitch Ratings has affirmed AK BARS Bank’s (ABB, the Bank) Long-term foreign currency Issuer Default Rating (IDR) at ’BB-’ with Negative Outlook.
Key rating drivers, according to Fitch, indicate its view of potential support to be received from the regional authorities, when required, which is based on the majority ownership, operational control over the Bank and the track record of support including capital injections. The rating is also supported by ABB’s substantial market shares in its local region.
Fitch views probability of support as moderate. There are also some concerns of Fitch in respect of ABB corporate governance risks and holding of non-core assets. In the meantime, ABB is expected to receive RUB 9.8 bln. equity injection from the RT-controlled President State Housing Fund in August 2015. The stake held by the Republic of Tatarstan and public sector bodies will increase to 64%. According to the Bank’s estimates, the share of Tatarstan Republic through its ministries, government agencies and related companies ultimately controlling the Bank will make over 70%. Recently ABB has also received RUB 12.1 bln of Tier 2 capital from Russia’s Deposit Insurance Agency.
National Long-Term rating with stable outlook was also affirmed at ’A+(rus)’ reflecting Fitch’s view that the Bank’s creditworthiness relative to other Russian banks would be unlikely to change significantly in case of downgrade of its shareholders.
Decent concerns of the weak asset quality and capitalization, as well as negative profitability, however along with stable funding and the Bank’s significant local franchise, are reflected in ’b-’ level Viability Rating of the Bank. Meanwhile, the outlook revision to Stable may happen if the Bank considerably reduces the amount of high risk assets or the authorities provide sufficient equity to offset the relevant risk.
The Bank is taking steps to improve its performance under conditions of deterioration in the operating environment.