Source of information: http://www.cbonds.info/all/eng/news/index.phtml/params/id/412352
Fitch Ratings-London/Moscow-13 October 2008: Fitch Ratings has today changed Ukraine-based Nadra Bank’s Outlook to Negative and downgraded its Individual rating to 'E' from 'D/E'. The rating actions reflect deterioration in the bank’s asset quality, while the bank’s liquidity position has also come under some pressure. For a full list of rating actions, see the end of this announcement.
Loans with payments overdue by 90 days or more (non-performing loans, or NPLs) increased to 7.4% at end-H108 from 5.7% at end-2007, while those overdue for up to 90 days grew very fast during H108, indicating the potential for a further rise in problem exposures. Although write-offs have been minimal during the last two years and Fitch understands that most of the NPLs are secured, the agency regards the bank’s loan impairment levels as high, particularly in light of the (until recently) relatively favourable credit environment. Furthermore, reserve coverage of NPLs is low (below 40% at end-H108 in the bank’s statutory accounts) and the quality of capital is weak, with a significant part of this coming from revaluations of investments with limited liquidity.
Nadra’s liquidity position has also come under some pressure in recent weeks. However, the bank has received a UAH1.5bn (equivalent of USD309m) one-year collateralised refinancing facility from the National Bank of Ukraine which should improve its financial flexibility and help it to repay a USD100m eurobond and a USD130m syndicated loan, both due in November 2008. Fitch understands that the bank’s borrowings and placements on the domestic interbank market are broadly matched by amounts and tenors; however, the bank, like many others in Ukraine, could be vulnerable to a sustained outflow of customer funds.
Nadra’s Long-term Issuer Default Rating (IDR) of ‘B-’ (B minus) is now driven by potential support from the Ukrainian authorities, reflecting what Fitch views as a significant propensity of the latter to provide support to a bank of Nadra’s size. The Negative Outlook on the Long-term IDR reflects that on the sovereign’s ratings, and Nadra would likely be downgraded if the sovereign rating is downgraded. Against this, a reversal of asset quality trends, strengthening of capitalisation and improvement of liquidity would be positive for the bank’s credit profile.
Nadra is the seventh-largest Ukrainian bank by asset size, with a strong presence in the retail segment and about 3.4% of system assets at end-H108. The bank currently has the sixth-largest nationwide network of branches and outlets (over 700 units in various formats), the fifth-largest network of ATMs (over 1,150) and the third-largest network of plastic card-acquiring terminals (over 6,400). About 87% of Nadra's shares are ultimately held by three individuals (including 33.4% held by Nadra's CEO, Igor Gilenko). Foreign portfolio investors jointly own 8%, including East Capital Fund’s 7%.
Rating actions taken today:
Long-term IDR affirmed at 'B-'(B minus); Outlook changed to Negative from Positive
Senior unsecured debt: affirmed at 'B-' (B minus), RR4
Short-term IDR: affirmed at 'B'
Individual Rating: downgraded to 'E' from 'D/E'
Support Rating: affirmed at '5'
Support floor: affirmed at 'B-'