Vneshtorgbank's S&P credit ratings still at BB+ and B, with stable outlook

The international rating agency Standard & Poor's reaffirmed the credit ratings of Russia's Vneshtorgbank at BB+ and B, with the outlook stable, after the bank had announced its plans to purchase a 86-percent stake in Guta Bank at an unspecified price, S&P says in a press release obtained by RIA Novosti Tuesday.

Vneshtorgbank's current ratings reflect the government's ongoing support for this bank, as well as its high profile and its good capitalization level, Yekaterina Trofimova, a credit analyst with Standard & Poor's, has remarked.

According to her, the bank's ratings also reflect the risks still facing Russia's banking sector and its economy at large, as well as problems arising from the ambitious strategy of business expansion and diversification plus the high (although currently descending) concentration of the bank's credit portfolio.

Guta Bank ranks among Russia's top twenty banks. It has now been weakened by a substantial outflow of deposits amidst rumors about its insolvency at a time of high instability on the Russian banking market. The Bank of Russia has now pledged a $700 million deposit to stabilize Guta's balance. Vneshtorgbank is assessing the bank's solvency before the takeover.

While any substantial defects on Guta's balance may downgrade Vneshtorgbank's own standing, the ratings of this latter bank take into account tangible support on the part of the government, the S&P press release points out. It goes on to say that the main factor to influence the bank's credit ratings in the future will be the evolution of Russia's economic climate, favorable at this point.

Standard & Poor's will also be monitoring the Guta takeover's impact on the operational and financial activities of Vneshtorgbank, adds S&P credit analyst Irina Penkina.

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Author`s name: Editorial Team