Moody's Interfax Downgrades Slavianski Bank to Baa2.ru
OREANDA-NEWS. Moody's Interfax Rating Agency has downgraded Slavianski Bank's long-term national scale credit rating (NSR) -- which reflects the standing of the bank's credit quality relative to its domestic peers - to Baa2.ru from Baa1.ru.
According to Moody's Interfax, the downgrade of Slavianski Bank's NSR primarily reflects the increase in its related-party exposure (in accordance with IFRS) from an already high level of 56% of shareholders' equity in 2004 to 112% of equity at year-end 2005.
Other key drivers of the rating change are: (i) the bank's weak financial performance as it reported a net loss under IFRS in 2005, while in 2004 its RoAA was less than 1%; (ii) the excessive involvement in financial market operations, both domestically and internationally, which could result in substantial losses threatening the bank's profitability and solvency; and (iii) the significant single-party concentration in its loan portfolio.
Moody's Interfax will closely monitor future developments in Slavianski Bank's financial performance and asset risk profile, and further negative rating actions could follow in the event of a further increase in related-party exposure, negative profitability for the second successive year or material deterioration of the bank's loan book quality.
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