Moody’s downgrades three major Russian Financial Institutions 

Moody’s Investors Service has on Monday 19, 2015  downgrades three major Russian Financial Institutions namely Sberbank, Agency for Housing Mortgage Lending OJSC and Vnesheconombank.

These actions follow the weakening of Russia’s credit profile, as reflected by Moody’s downgrade of Russia’s government bond rating to Baa3 from Baa2 on the 16th of January, 2015 and placing it on review for further downgrade.

Specifically, Moody’s downgraded the supported senior unsecured debt, local-currency deposit and issuer ratings of the three government-owned Russian financial institutions that are rated at the same level as the Russian sovereign due to government support assumptions. The affected ratings remain on review for downgrade because of (1) the review for downgrade of the sovereign debt rating; and (2) the considerations that Moody’s stated in a rating action last month on Russian financial institutions, regarding the significant funding, asset quality and profitability pressures that they now face as a result of Russia’s challenging operating environment for the medium term.

RATINGS RATIONALE

The weakening of Russia’s credit profile has prompted the rating actions on the three financial institutions that are rated at the same level as the government bond rating. While Moody’s considers that the Russian government will remain willing to assist these entities in the event of need, its capacity to do so has declined, as expressed by the downgrade of the government debt rating to Baa3 from Baa2 with a further review for downgrade.

WHAT COULD MOVE THE RATINGS UP/DOWN

The key drivers of actions relate to the weakening of the sovereign credit profile, as reflected in the downgrade of Russia’s government bond rating. Therefore, Moody’s considers that upward pressure on the supported ratings of the three Russian financial institutions is unlikely in the near term.

As expressed by the review for downgrade on the long-term ratings, the three Russian financial institutions’ ratings could be downgraded further in the event of any further downgrade of the government bond rating. Downward adjustments could also be triggered by an erosion of the banks’ standalone credit profiles.

Source: Moody’s – Moody’s downgrades 3 Russian financial institutions’ long- and short-term ratings

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