22 October 2003 16:57
RUSSIA: MOODY`S ASSIGNS E+/BA3/NP FIRST-TIME RATINGS TO KMB-BANK
Moody's Investors Service has assigned to Russia's KMB-Bank (KMB), also known as Small Business Credit
Bank, an E+ Financial Strength Rating (FSR), and ratings of Ba3/NP for long- and short-term foreign currency deposits.
All ratings carry stable outlooks. KMB-Bank is a niche market player focussing exclusively on micro crediting and
providing credits to, small and medium-sized enterprises, including both corporate customers and private entrepreneurs.
The bank is part of a network of micro, small and medium sized enterprise finance banks that operate throughout the
lesser developed countries of Central and Eastern Europe. KMB, like the other banks, is partially owned by the European
Bank for Reconstruction and Development (EBRD). According to Moody's, the Ba3/NP foreign currency deposit ratings
imply some degree of support from EBRD. The rating agency believes that EBRD would provide support to KMB in a crisis
situation. Although EBRD owns just 35.2% of the bank's capital, it is the source of practically all of the
bank's term funding; it provides technical and managerial assistance and has supported KMB in the past, most
notably during the 1998 financial crisis. However, the size of any future support may be only limited and its timeliness
rather uncertain, Moody's adds. According to Moody's, given the degree of importance of KMB's
relationship with EBRD, any material change in its ownership would be likely to have consequences for the bank's
deposit ratings. The ratings do not incorporate any support from the government authorities in case of distress. The E+
FSR reflects KMB's clear strategy, the good geographic and client diversification of the loan portfolio, very
strong reported asset quality and gradually improving profitability and efficiency. The FSR is constrained by heavy
reliance on term funding from the bank's shareholders, relatively weak capitalisation and unique risks stemming
from concentrated lending to micro and SME sectors, notes Moody's. In addition, Russia's difficult and still
potentially volatile operating environment remains one of the constraints on all KMB's ratings. At the same time,
Moody's believes that the bank's ratings are sustained by gradually improving economic conditions in the
country backed by continuing high international commodity prices, particularly of oil. KMB-Bank is headquartered in
Moscow, Russia and reported total IAS assets of RUB5.4 billion (US$171 million) at 31 December 2002.
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