OREANDA-NEWS. December 23, 2009. Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it downgraded to uaBB from uaBBB- (uaBBB minus) the long-term credit rating assigned to Kharkiv-based Zembank JSB (‘bank’) and to its registered coupon bonds (series A) for the amount of UAH50m, with 5-year original maturity. The outlooks on the ratings are negative. In the course of analysis Credit-Rating considered bank’s financial statements for 2008 and 9M2009 and its other inside information.

An obligor or a debt liability with uaBB credit rating is characterized with the LOWER THAN SUFFICIENT creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is strongly affected by adverse changes in commercial, financial and economic conditions.

Negative outlook indicates that there is a possibility to downgrade the rating in the course of the year, on condition that negative tendencies are retained and current risks are realized.

Factors maintaining the credit rating

Bank’s high capitalization ratios.

Profitable performance of the institution.

Factors constraining the credit rating

High concentration of the loan portfolio by primary borrowers, which may negatively affect bank’s liquidity and capitalization.

Sharp decline in bank’s liquidity indicators, which required raising loans for their support from the National Bank of Ukraine.

High concentration of the bank’s resources by primary depositors, which limits bank’s financial flexibility and raises the liquidity risks.

The bank’s risky credit policy: the portion of real estate and cash deposits in the structure of collateral is under 40%.

The bank’s risk management system requires enhancements.

Growing impact of external factors on the financial market and subsiding business activities in certain sectors, which may negatively affect solvency of certain borrowers and weigh on bank’s financial indicators.