S&P assigns 'BBB-/A-3' and 'kzAA' ratings to Kazakh VTB Bank
Azerbaijan, Baku, Sep. 27 / Trend E. Kosolapova/
Standard & Poor's Ratings Services assigned its 'BBB-' long-term and 'A-3' short-term counterparty credit ratings to Kazakhstan-based VTB Bank (Kazakhstan) (VTB Kaz). The outlook is stable.
At the same time, Standard & Poor's assigned 'kzAA' Kazakhstan national scale rating to the bank.
"We consider VTB Kaz to be a "highly strategic" subsidiary of Russia-based VTB Bank (JSC) because the Kazakhstan market is an important part of the group's expansion strategy, VTB Kaz's operations are highly integrated with those of the group, and the parent has committed support under any foreseeable circumstances," the agency said.
Despite its small size--less than 1 percent of VTB's total assets-- Standard & Poor's believes integration is strong because VTB Kaz is a greenfield investment and not an acquisition; its IT infrastructure, risk management, and underwriting process have been built in line with VTB's own practices. This makes it difficult to detach the bank from the rest of the group. Moreover VTB Kaz is 100 percent-owned by VTB and shares its name and branding and VTB Bank provides close to 9 percent of the subsidiary's funding. The start-up nature of VTB Kaz makes the bank dependent on VTB for business growth, notably for capital and access to creditworthy clients. Moreover strong ties between Russia and Kazakhstan, economically and politically, make it very unlikely that state-owned VTB Bank would dispose of its subsidiary, despite forecast weak operating performance.
Standard & Poor's views the stand-alone credit profile (SACP) of VTB Kaz at 'b', reflecting the 'bb-' anchor for a bank operating primarily in Kazakhstan, its "moderate" business position, "moderate" capital and earnings, "moderate" risk position, "average" funding and "adequate" liquidity.
"The stable outlook mirrors our outlook on the parent" the agency said. Standard & Poor's assumes that VTB Kaz will remain a "highly strategic" subsidiary of VTB Bank) and continue to receive operational, managerial, and financial support from its parent under almost all foreseeable circumstances.
Positive or negative rating actions on parent VTB Bank will likely result in parallel actions on VTB Kaz. Even though a slight improvement or deterioration of the SACP would not, in isolation, result in a rating change, Standard & Poor's expects VTB Kaz's financial profile to gradually improve as the bank attains a larger scale. Any long period of underperformance or inability to reach the profitability or self-financing goals imposed by the parent could lead the agency to reconsider the "highly strategic" status, and therefore lower the ratings.