OREANDA-NEWS. On September 19, 2008 Fitch ratings assigned to Rosevrobank ratings of Long-term Issuer Default (IDR) 'B', Short-term IDR 'B', Individual 'D', Support '5', National Long-term ‘BBB-(minus)(rus)’ and Support Rating Floor 'No Floor'. Outlooks of both Long-term IDR and National Long-term rating are Stable, reported the press-centre of RosEvroBank:

"Fitch Ratings-London/Moscow-19 September 2008: Fitch Ratings has today assigned Russia's RosEvroBank (REB) ratings of Long-term Issuer Default (IDR) 'B', Short-term IDR 'B', Individual 'D', Support '5', National Long-term ‘BBB-(minus)(rus)’ and Support Rating Floor 'No Floor'.

The Outlooks for the Long-term IDR and National Long-term rating are Stable.
The ratings reflect REB’s limited, albeit growing, franchise, concentrated balance sheet and potentially vulnerable liquidity. At the same time, they reflect its good reported asset quality to date and currently reasonable capitalisation.

The loan book continued to grow rapidly in H108 and 2007, marginally outstripping banking sector loan growth. REB mostly lends to well-established medium-sized businesses, but also to larger companies, while retail lending is mostly secured and comprised 17.8% of the end-H108 loan book. Borrower concentration is high, albeit broadly in line with peers and gradually decreasing. Reported operations with related parties are low.

REB’s non-equity funding remains undiversified and predominantly short-term, and is mainly sourced from customer accounts (70% at end-H108), meaning the bank's liquidity is potentially vulnerable.

This, however, has been manageable so far, with a significant liquidity cushion maintained and the bank’s strategy is to diversify its funding base further, albeit this will be very challenging near-term given the current market environment.

REB faces repayments on foreign borrowings equal to an estimated total 14% of end-H108 liabilities in Q408 and H109 (including a USD120m Eurobond in October 2008), but current liquid assets should be sufficient to meet these, even if the bank is not able to partially refinance.

Performance has been reasonable (return on average assets 1.6% in H108; 1.9% in 2007), but is vulnerable to any marked increase in funding, operational or credit costs. The Fitch Eligible Capital and Basel tier I ratios stood at a sound 13.6% at end-H108, although these are likely to gradually fall in the absence of any near-term plans to inject new equity.

REB’s securities holdings are mainly in government debt and bank promissory notes, and Fitch is informed that the bank has incurred no significant losses on its securities portfolio in Q308.

Upside potential for the ratings is currently limited, but REB’s credit profile would benefit from continued strengthening of the franchise (implying further broadening of the customer base and regional expansion), a strengthening of profitability and greater funding diversification.
Downward pressure could mainly result from a material weakening of asset quality and/or a major liquidity shortfall.

REB is a medium-sized, Moscow-based bank, the 55th-largest in Russia by assets at end-H108. Traditionally focused on lending to corporate clients, the bank now aims to penetrate the retail and SME sectors and expand into regions. REB is owned by several individuals (84%), funds managed by Renaissance Investments Management (10%) and Deutsche Investitions- und Entwicklungsgesellschaft (6%).