(The following statement was released by the rating agency)
LONDON/MOSCOW, October 10 (Fitch) Fitch Ratings has affirmed Sberbank Slovensko
a.s.'s (SBSK) Long-term Issuer Default Rating (IDR) at 'BBB-' with a Stable
Outlook. The agency has also affirmed SBSK's Viability Rating (VR) at 'bb-'. A
full list of rating actions is at the end of this commentary.
KEY RATING DRIVERS: IDRS AND SUPPORT RATING
SBSK's IDRs and Support Rating reflect the potential support the bank can expect
from its ultimate owner, Sberbank of Russia (SBRF; BBB/Stable). Fitch believes
the ultimate parent would have a high propensity to provide support to SBSK, if
needed, in light of the strategic importance for SBRF of the broader central and
eastern European region. This view also takes into account SBSK's small size
relative to the parent's assets and capital base and therefore the low cost of
potential support. At end-H113, SBRF controlled 99.39% of SBSK's shares via its
100%-owned Vienna-based subsidiary Sberbank Europe AG (SBEU; BBB-/Stable).
RATING SENSITIVITIES: IDRS AND SUPPORT RATING
SBSK's Long-Term IDR would probably be downgraded or upgraded if there was a
change in SBRF's Long-term IDR. Any marked revision of Fitch's view of SBRF's
potential support to SBSK would also affect SBSK's IDRs.
KEY RATING DRIVERS: VR
The affirmation of SBSK's VR at 'bb-' takes into account the bank's ongoing
recapitalisation and stronger reserve coverage of impaired loans, as well as low
refinancing risks as a result of the limited use of non-deposit funding. At the
same time, the VR factors in SBSK's small size and modest market shares,
currently weak profitability and concentration risks in its loan book, in
particular as a result of financing of real estate projects (net exposure equal
to 0.8x Fitch core capital (FCC) at end-H113, down from 2.3x at end-H112).
High loan loss provisions, mostly driven by a loan book review by SBRF following
the acquisition of SBSK, had a negative effect on SBSK's performance results
during 2012-H113, which were also hit by the Slovakian bank levy. The bank
budgets a return to profitability in H213, driven by the planned drop in new
provisions as the portfolio clean-up has largely been completed, as well as
higher loan growth. Low interest rates, competition and the relatively high cost
base will remain constraints on profitability.
NPLs (loans overdue by more than 90 days) were stable at around 7% of gross
loans at end-H113 and end-2012, albeit above the sector average of 5.4%. In
addition, restructured loans, which would have been in default if it was not for
prolongations, accounted for a further 6.5% of loans at end-H113 (end-2012:
4.4%). NPL reserve coverage was over 100%, although this ratio varies
significantly for different NPL categories, and overall coverage of NPLs and
restructured loans was a more moderate 62%, reflecting the bank's significant
reliance on collateral.
The FCC ratio improved to 10% at end-H113 from 7% end-H112, due to a new equity
injection and the conversion of preferred shares into ordinary stock. A further
planned EUR40m Tier I capital injection in Q413 and another EUR27m Tier II
injection in 2014 should have a short-term positive effect on the bank's capital
adequacy, creating flexibility to grow, notwithstanding modest internal capital
generation. The bank targets maintaining a total regulatory capital ratio in
excess of 11% (end-H113: 11.4%), which Fitch views as no more than adequate.
RATING SENSITIVITIES: VR
Upside potential for SBSK's VR is currently limited, but the bank's credit
profile would benefit from franchise diversification and a reduction in
portfolio concentrations, and stronger profitability in a more favourable
macroeconomic environment. Should the bank suffer large losses as a result of
further deterioration in loan quality without this being offset by equity
injections, the VR could be downgraded.
The rating actions are as follows:
Long-term foreign currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F3'
Support Rating: affirmed at '2'
Viability Rating: affirmed at 'bb-'
+7 495 956 6906
Fitch Ratings Moscow
Valovaya str., 26
+48 22 338 6292
+7 495 956 6657
Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email:
Additional information is available on www.fitchratings.com
Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15
August 2012; 'Rating FI Subsidiaries and Holding Companies', dated 10 August
2012 and Evaluating Corporate Governance, dated 13 December 2011; are available
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Rating FI Subsidiaries and Holding Companies
Evaluating Corporate Governance
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