OREANDA-NEWS. Fitch Ratings has upgraded Absolut Bank's Long-term Issuer Default Rating (IDR) to 'B+' from 'B'. The agency has also affirmed the Long-Term IDRs of LLC Expobank (EB), Russian Universal Bank (Rusuniversal) and Spurt-Bank (Spurt) at 'B'. The Outlooks on all four banks' IDRs are Stable.

The upgrade of Absolut's IDR to 'B+' from 'B' mainly reflects its longer track record of sustainable performance after it was acquired in May 2013 by Non-State Pension Fund Blagosostoyanie (the Fund), controlled by JSC Russian Railways (RR, BBB/Negative), and reduced concerns about its recent merger with sister bank, OJSC KIT Finance Investment Bank (KIT), partly because the Fund had acquired some impaired assets from KIT's balance sheet prior to merger. The upgrade also considers the Fund's now stronger commitment in assisting the bank in its development, also reflected in considerable amount of funding provided to it by the Fund's related parties to replace that of the former owner KBC Bank (A-/Stable), and broader involvement of the bank in servicing companies related to the Fund.

The affirmation of EB's international ratings reflects the track record of successfully managed M&A deals, adequate capitalisation and liquidity, and moderately improved, although potentially vulnerable profitability. At the same time, the ratings also take into account the limited franchise, high balance sheet concentrations and further expected fast growth through M&A activities, and specifically uncertainty related to the expected acquisition of a bank in Czech Republic. The upgrade of the National Rating reflects Fitch's view that the bank's credit profile is relatively stronger than that of some other Russian banks with a 'b' Viability Rating.

Upside potential for the ratings is limited given the limited franchise and balance sheet concentrations. The ratings could be downgraded in case of material erosion of asset quality and capitalisation. A weakening of the bank's relations with the regional authorities, resulting in significant deposit outflows could also result in a downgrade.

The affirmation of Rusuniversal's ratings reflect limited changes in the credit profile since our last review, including the bank's narrow franchise and highly-concentrated balance sheet with a high level of relationship-based business and some regulatory risk. At the same time, the bank's ratings take into account healthy reported asset quality, strong capitalisation, and ample liquidity.

Rusuniversal focuses mainly on defence sector companies with whom the bank's management/shareholders have long-term relations. Both loan and deposit books are extremely concentrated. The top 10 loans made up 83% of gross loans and the top five depositors 77% of customer accounts. There is also an overlap between some depositors and borrowers, further underlying franchise limitations and some regulatory risk. There is also a risk that the state may force defence industry companies to transfer financial flows to state-owned banks, potentially challenging Rusuniversal's long-term viability.