OREANDA-NEWS. Fitch Ratings has affirmed the Long-term foreign currency Issuer Default Ratings (IDRs) of ZAO Raiffeisenbank (RBRU), ZAO Citibank (ZCB), Rosbank (RB), Rusfinance Bank (RFB) and DeltaCredit Bank (DCB) at 'BBB+', and ZAO UniCredit Bank (UCB) IDR at 'BBB'. The Outlooks are Negative. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS - IDRs, NATIONAL RATINGS, SENIOR DEBT AND SUPPORT RATINGS
The six banks' IDRs, National Ratings and, where assigned, senior debt ratings are driven by potential support from foreign shareholders. RBRU is a 100%-subsidiary of Raiffeisen Bank International AG (RBI, A/Negative/bbb). ZCB is fully-owned by Citigroup Inc. (A/Stable/a). RB, RFB and DCB are ultimately owned by Societe Generale (SG; A/Negative/a-; SG holds a 99.4%-stake in RB, which in turn owns 100% of RFB and DCB). ZAO UniCredit Bank is 100%-owned by UniCredit S.p.A. (UC; BBB+/Negative) through its Vienna-based subsidiary UniCredit Bank Austria AG (UBA; A/Negative).

The affirmation of the six banks' Support Ratings at '2' reflects Fitch's view that their parents will continue to have a strong propensity to support these banks given the strategic importance of the Russian market for the parents, the high level of operational and management integration between the banks and their parents, majority ownership, common branding and importance for group operational performance (in the case of RBRU).

The banks' IDRs and, where assigned, senior debt ratings, with the exception of UCB, are constrained by the Russian Country Ceiling of 'BBB+'. The Negative Outlooks on the IDRs of these banks reflect the Negative Outlook on the sovereign. Russia's Country Ceiling captures transfer and convertibility risks and limits the extent to which support from the foreign shareholders of these banks can be factored into their Long-term foreign currency IDRs. The banks' Long-term local currency IDRs, where assigned, also take into account Russian country risks.

Fitch notches UCB's Long-term IDRs down once from UC's Long-term IDR. The Negative Outlook on UCB's Long-term IDRs mirrors that on UC's Long-term IDR.

RATING SENSITIVITES - IDRS, NATIONAL RATINGS, SENIOR DEBT AND SUPPORT RATINGS
The banks' Long-term IDRs and, where assigned, senior debt ratings, with the exception of UCB, could be downgraded if Russia's sovereign ratings and Country Ceiling are downgraded. A revision of the sovereign Outlook to Stable would lead to the banks' Outlooks being revised to Stable.

A significant weakening of support ability/propensity could also result in the downgrade of banks' support-driven ratings. Specifically, RBRU, ZCB, RB, RFB and DCB could be downgraded if their parents were downgraded by more than one notch. The Negative Outlooks on SG and RBI reflect Fitch's expectation that sovereign support for banks in most developed markets is likely to decline. If the Long-term IDRs of SG and RBI are ultimately downgraded to the levels of their current VRs, then RBRU would likely be downgraded by two notches, to 'BBB-'. However, RB, RFB and DCB would be affirmed, reflecting SG's higher VR.

If UC is downgraded, UCB's Long-term IDR and National Rating would likely also be downgraded. UCB's ratings could stabilise at their current levels if the Outlook on UC was revised to Stable.

KEY RATING DRIVERS - VRS
The affirmation of RBRU, ZCB and UCB's VRs at 'bbb-' and RB, RFB and DCB's at 'bb+' reflects the limited changes in the banks' standalone credit profiles since their last review in July 2013.

RBRU, ZCB and UCB have demonstrated a track record of solid financial performance (with operating ROAE in the range of 20%-25% for the three banks in 2013); below sector average credit costs resulting from access to better quality customers and sound risk management controls; comfortable capital (Fitch Core Capital, FCC, ratios in the range of 17%-20% for the three banks at end-2013) and liquidity positions (all three banks remained net creditors to their parent institutions, reflecting excess liquidity from short-term customer deposits); generally stable funding bases, resulting in below peers' funding costs; moderate loans/deposits ratios (close to 100% at RBRU and UCB and more conservative at around 50% at ZCB at end-2013) and effective cost controls.
The VRs also factor in significant foreign currency lending and borrower concentrations at RBRU and UCB, the still sizeable real estate exposure at RBRU, high share of unsecured corporate lending and depositor concentrations at UCB, and franchise limitations of ZCB.

RB's 'bb+' VR reflects its broad country-wide franchise, particularly in car and mortgage lending, generally low-risk corporate loan book, healthy capital (FCC ratio at 15.6% at end-2013) and liquidity cushions and conservative growth plans. The VR also takes into account weak operating efficiency, resulting in only moderate profitability (operating ROAE of 14.5% in 2013), reducing, albeit still considerable reliance on parent funding (12% of end-2013 liabilities) to finance the business of its specialised retail subsidiaries, RFB and DCB, and the weak quality of the legacy corporate loan portfolio, originated before SG's management gained full operational control over the bank. However, the latter exposures are reasonably secured and adequately provisioned, in Fitch's view, although they continue to generate some minor impairment losses.

RFB's and DCB's 'bb+' VRs are underpinned by the banks' continued strong performance in a tougher operating environment, reflected in robust profitability (pre-impairment operating ROAE in the range of 25%-27% for these two banks in 2013), resilient asset quality (negligible NPL ratios at DCB and credit losses at RFB well below the estimated break-even level), strong capitalisation (FCC of 23% for RFB and 27% for DCB at end-2013) and sound management. The banks' VRs remain constrained by still significant, albeit decreasing, reliance on SG funding (25%-26% of the two banks' non-equity funding, in addition to the 12%-15% sourced from RB at end-1Q14), which could be costly to rollover in case of sharp weakening of the Russian rouble (more relevant for DCB, given the longer-term nature of its lending). As a mitigating factor, both banks have a comfortable refinancing schedule and proven track record of attracting local wholesale funding. RFB's VR also considers weaker near-term prospects for the Russian unsecured consumer finance market.

RATING SENSITIVITIES - VRS
Upside potential for the VRs is limited given the current level of Russia's sovereign ratings (BBB/Negative) and likely cyclical performance of the Russian economy and therefore the banks. The VRs of RBRU, ZCB and UCB could be downgraded in case of a sovereign downgrade and a significant weakening of the operating environment. A sharp deterioration in any of the six banks' standalone credit metrics could also warrant a downgrade. Stabilisation of the sovereign's credit profile and the country's economic prospects would reduce downward pressure on the VRs.

Moderate upside pressure on the VR of DCB and RB would stem from the stabilisation of operating environment, reduced reliance on parent funding, and, in case of RB, from improved profitability.

The rating actions are as follows:
ZAO Raiffeisenbank
Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Negative
Long-term local currency IDR: affirmed at 'BBB+'; Outlook Negative
Short-term foreign currency IDR: affirmed at 'F2'
National Long-term rating: affirmed at 'AAA(rus)'; Outlook Stable
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '2'
Senior unsecured debt: affirmed at 'BBB+'/'AAA(rus)'
Senior unsecured debt: affirmed at 'F2'
Senior unsecured debt: affirmed at 'BBB+(EXP)'/'AAA(EXP)(rus)'

ZAO Citibank
Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Negative
Short-term foreign currency IDR: affirmed at 'F2'
National Long-term rating: affirmed at 'AAA(rus)'; Outlook Stable
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '2'

ZAO UniCredit Bank
Long-term foreign and local currency IDRs: affirmed at 'BBB'; Outlook Negative
Short-term foreign and local currency IDRs: affirmed at 'F3'
National Long-term rating: affirmed at 'AAA(rus)'; Outlook Negative
Support Rating: affirmed at '2'
Viability Rating: affirmed at 'bbb-'

Rosbank
Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Negative
Long-term local currency IDR: affirmed at 'BBB+'; Outlook Negative
Short-term foreign currency IDR: affirmed at 'F2'
National Long-term rating: affirmed at 'AAA(rus)'; Outlook Stable
Viability Rating: affirmed at 'bb+'
Support Rating: affirmed at '2'
Senior unsecured market linked securities: affirmed at 'BBB+(emr)'
Senior unsecured debt: affirmed at 'BBB+'/'AAA(rus)'
Senior unsecured debt: affirmed at 'F2'

Rusfinance Bank
Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Negative
Long-term local currency IDR: affirmed at 'BBB+'; Outlook Negative
Short-term foreign currency IDR: affirmed at 'F2'
National Long-term rating: affirmed at 'AAA(rus)'; Outlook Stable
Viability Rating: affirmed at 'bb+'
Support Rating: affirmed at '2'
Senior unsecured debt: affirmed at 'BBB+'/'AAA(rus)'

DeltaCredit Bank
Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Negative
Long-term local currency IDR: affirmed at 'BBB+'; Outlook Negative
Short-term foreign currency IDR: affirmed at 'F2'
National Long-term rating: affirmed at 'AAA(rus)'; Outlook Stable
Viability Rating: affirmed at 'bb+'
Support Rating: affirmed at '2'
Senior unsecured debt: affirmed at 'BBB+'/'AAA(rus)'
Senior unsecured debt of DCB Finance Limited: affirmed at 'BBB+(EXP)'.