Fitch affirms IDRs of 5 Ukrainian foreign-owned banks
Fitch Ratings has affirmed the Long-Term Foreign Currency Issuer Default Ratings (IDRs) of PJSC Alfa-Bank (ABU), Ukrsotsbank (Ukrsots), ProCredit Bank (Ukraine) (PCBU), PJSCCB Pravex-Bank (Pravex), and PJSC Credit Agricole Bank (CAB) at 'CCC', Fitch said in a statement.
At the same time Fitch has removed Ukrsots and Pravex from Rating Watch Negative (RWN).
Fitch also affirmed the banks' viability ratings (VRs): CAB at 'b-', ABU and PCBU at 'ccc' and Ukrsots' and Pravex's VRs at 'cc'.
Fitch says that all five banks' IDRs and National Ratings factor in the likelihood of support they may receive from their foreign shareholders. The affirmation of the banks' 'CCC' Long-Term Foreign Currency IDRs reflects the constraint of Ukraine's Country Ceiling (CCC), which captures transfer and convertibility risks and limits the extent to which support from the majority foreign shareholders of these banks can be factored into the ratings. The limited capital and currency controls introduced in 1H14 largely remain in place, albeit having been gradually eased in 1H16.
The affirmation of the five banks' Long-Term Local Currency IDRs, and the senior unsecured local currency debt of ABU and Ukrsots, at 'B-', i.e. one notch above the 'CCC' sovereign rating, reflects the strength of the expected shareholder support for these entities. The revision of the Outlooks on Long-term local-currency IDRs to Stable from Negative (with the exception of Pravex) reflects Fitch's view of the somewhat reduced country risks, and in particular the lower risk of extreme scenarios where the banks' ability to service their local currency obligations could be constrained by regulatory action.
ABU's IDRs and senior debt ratings are driven by Fitch's view on potential support the bank may receive from other assets controlled by its main shareholders, including its sister bank, Russia-based OJSC Alfa-Bank (AB; BB+/Negative). However, the probability of support is limited due to the indirect relationship with other Alfa Group assets and the mixed track record of support from its main shareholders.
Ukrsots is currently nearly 100%-owned by UniCredit S.p.A. (UniCredit, BBB+/Negative) through its Vienna subsidiary UniCredit Bank Austria AG (BBB+/ Negative). In 2015 UniCredit announced that it had signed a binding agreement on the transfer of its share in Ukrsots to ABH Holdings S.A. (ABHH) in exchange for 9.9% of ABHH's shares. ABHH is part of Alfa Group's financial business and is an owner of several CIS banking subsidiaries, including ABU. The deal is expected to be finalized in 2H16, following its approval by the Ukrainian regulatory authorities. Fitch believes UniCredit will continue to provide support to Ukrsots prior to its sale, while the probability of support from ABHH for Ukrsots is likely to be similar to that currently available for ABU. Consequently, Fitch has removed Ukrsots from RWN.
Pravex is fully owned by Intesa Sanpaolo S.p.A. (Intesa, BBB+/Stable). The bank has been up for sale since early 2014. However, given little apparent progress so far with the disposal of the bank and the absence at present of a named potential buyer, Fitch has removed Pravex's ratings from RWN. The Negative Outlook reflects the ultimate likelihood of a sale and hence the probable reduction in potential shareholder support.
PCBU is controlled (87% of voting stock) by Germany's ProCredit Holding AG & Co. KGaA. (BBB/Stable). CAB is fully owned by Credit Agricole S.A. (A/Positive).