Fitch Upgrades Russia's Bank Zenit to "B+"; Outlook Stable
Moscow, August 5, 2008
Fitch Ratings has today upgraded Russia-based Bank Zenit's (Zenit) Long-term Issuer Default Rating (IDR) to "B+" from "B" and National Long-term rating to "A-(A minus)(rus)" from "BBB+(rus)". Following the upgrade, the Outlooks on the Long-term IDR and National Long-term rating are now Stable. At the same time, the other ratings are affirmed at Short-term IDR "B", Individual "D", Support "5" and Support Floor "No Floor".
"The upgrade reflects Zenit's enhanced customer franchise, especially in Russian regions, and its extended track record of sound performance and good asset quality, backed by an adequate liquidity position," says Vladimir Markelov, Associate Director of Fitch's financial institutions team in Moscow. "However, the ratings are still constrained by the relatively high proportion of related-party funding and significant loan portfolio concentrations."
Zenit's lending is concentrated by borrower; however, the concentration level has been on a declining trend. Non-performing loans (NPLs) are low and well-provisioned for; however, impairment might rise as credit growth moderates. The level of lending to related parties is reportedly insignificant. Customer funding is concentrated, a third of which is sourced from the bank's related parties, mainly Tatneft ("BB"/Stable Outlook) and Novolipetsk Steel ("BB+"/Stable). Risky investments were reduced in 2007 and market risk is reasonably well-managed. Liquidity is adequate, with positive cumulative liquidity gaps. Taking into consideration the bank's lower credit growth in H108, capitalisation, which was adequate at end-2007, is not expected to worsen in the near term.
A further diversification of its franchise and reduced reliance on business with related parties would be positive for Zenit's credit profile. Downward pressure on the ratings could arise from considerable asset quality deterioration.
More detailed information: Fitch Ratings.
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