VTB Bank Kazakhstan ratings affirmed at 'BB/B' on continued group support
Baku, Azerbaijan, Nov. 1
By Elena Kosolapova – Trend:
The International Rating Agency S&P Global Ratings affirmed 'BB/B' long- and short-term counterparty credit ratings on VTB Bank (Kazakhstan), the agency reported. The outlook remains stable.
At the same time, S&P affirmed its 'kzA' long-term Kazakhstan national scale rating on VTB Bank (Kazakhstan).
“The affirmation reflects our view that VTB Bank (Kazakhstan) remains a highly strategic subsidiary of VTB Bank JSC and will continue receiving operational, managerial, and financial support from its parent under almost all foreseeable circumstances,” S&P said.
This unchanged assessment of VTB Bank (Kazakhstan)'s group status acknowledges that the bank's performance deteriorated over the last year in terms of asset quality and bottom line result. However, S&P expects the bank will manage its asset quality in accordance with the recovery plan, gradually reduce the level of nonperforming loans under local standards to 10 percent by end-2017 from 16.4 percent currently, and stabilize its business model in the medium term to bolster its preprovision profitability. S&P also sees VTB Bank as supportive of this turnaround plan and highly likely to remain committed to this market.
S&P believes that VTB Bank (Kazakhstan) is well integrated within VTB Group, and the current assessment of the subsidiary's creditworthiness stems from both ongoing as well as extraordinary parental support, which the agency expect the group would provide to the bank in the event of stress.
The stable outlook on VTB Bank (Kazakhstan) mirrors that on the bank's parent VTB Bank. Rating actions on VTB Bank (Kazakhstan) would likely follow rating actions on VTB Bank. S&P’s assessment of group support remains the major rating driver for VTB Bank (Kazakhstan) over the next 12 months.
S&P would lower its ratings on VTB Bank (Kazakhstan) if it downgraded VTB Bank. Even if the agency revised the group status of the subsidiary to strategically important or its assessment of its SACP, neither action would, by itself, lead to a negative rating action on VTB Bank (Kazakhstan). However, if S&P perceives a weakening in the subsidiary's SACP, this could also lead it to reconsider its group status--for example, if the agency anticipates a weakening in the parent’s long-term commitment to the Kazakhstan market and this subsidiary in particular. For example, S&P could revise the SACP downward if the agency observed a marked deterioration of its capital metrics, with RAC falling below 5 percent.
A positive rating action on VTB Bank (Kazakhstan) is unlikely over the next 12 months. However, if S&P was to take a positive rating action on the parent, which is remote in its view, it would likely take a similar rating action on VTB Bank (Kazakhstan), as long as it continues to consider it a highly strategic subsidiary.