Fitch Downgrades BTA Bank to 'CCC'
Azerbaijan, Baku, Nov 14 /Trend E. Kosolapova/
Fitch Ratings Agency has downgraded Kazakhstan-based BTA Bank and its subsidiary CJSC BTA Bank in Belarus to 'CCC' from 'B-', Fitch reported.
"BTA's default probability increased in the near to medium term," the report said.
According to the agency, this is driven by the recent sharp deterioration in the bank's reported financial position and the apparent readiness of the bank and the Kazakh authorities to consider a range of options, including less creditor-friendly ones, for restoring the bank's solvency.
BTA Bank is a backbone bank of Kazakhstan, the major shareholder of which is the Government of the Republic of Kazakhstan, represented by "Samruk Kazyna" National Welfare Fund having 81.48% of shares.
In Fitch's view, BTA's financial position has now deteriorated to such an extent that even quite favourable results of the bank's loan recovery efforts (which is not the agency's base case at present) would be insufficient by themselves to return the bank to solvency.
"The scale of BTA's pre-impairment losses (33 billion tenge or $225 million in H111) is such that elimination of the negative carry on the bank's government-related assets and liabilities would only approximately halve, rather than fully eradicate these losses," the report said.
Fitch expects that any final decision on BTA will be made at a high political level, and is hence quite unpredictable.
According to the agency, Kazakhstan sovereign ('BBB-'/Positive) has sufficient resources to provide necessary support to BTA if it chooses, and that the potential reputational damage from a repeated default of the bank provides some incentive for the Kazakh authorities to finance a bail-out.
However, in the agency's view, the risks of a default are considerable, and are now commensurate with a 'CCC' rating, indicating that default is a real possibility.
BTA could be downgraded further if the Kazakh authorities and/or the bank give a clear indication that a restructuring of the bank's liabilities, under terms which Fitch would classify as a coercive debt exchange, will take place. Conversely, BTA could be upgraded if the bank is returned to solvency and viability without a default on its liabilities.