17 May 2004 06:36
Fitch assigns `BB` rating to Bank Of Moscow
MOSCOW. May 17 (Interfax) - Fitch Ratings has assigned ratings to Moscow Municipal Bank - Bank of Moscow (BOM) of
Long-term 'BB', Short- term 'B', Individual 'D' and Support '3', the agency said
in a press release Monday.
The Outlook for the Long-term rating is Stable. Additionally, Fitch has assigned BOM a National Long-term rating of
'AA(rus)'.
The International Long-term, Short-term and Support ratings are driven by the potential support from the City of
Moscow for BOM, should the bank run into financial difficulty. BOM is 63%-owned by the City of Moscow and will remain
majority-owned, following a new share issue expected in the second half of 2004. BOM provides an array of banking
services to the City and to parties closely connected with the City and is frequently involved in City programs (e.g.
housing development, the "Muscovite" card etc.).
BOM's Individual rating reflects its concentrated balance sheet, potentially volatile earnings, the credit and
operational risks involved in a rapid growth strategy and a potentially low level of loan loss reserves, but also its
good franchise in Moscow and respectable asset quality.
BOM has been growing its balance sheet extremely fast and plans to continue to do so throughout 2004. As well as
possibly concealing future asset quality problems, this is putting pressure on the bank's capitalization, which in
Fitch's view is only moderate. This is in light of the low level of loan loss reserves, and also a high level of
fixed assets and shares in associated companies etc., which reduces "free capital". Consequently, Fitch
welcomes the upcoming estimated 4.8 billion ruble share issue.
BOM's concentrated loan book and securities trading operations mean that earnings are potentially volatile.
However, securities trading gains are becoming less meaningful as BOM's intermediation operations grow, thereby
growing net interest income and improving overall earnings quality.
Asset quality has been good for a Russian bank and BOM was able to record a net release of loan loss provisions in
2003, despite a rapidly growing loan book. Even so, non-performing loans are likely to rise as loans season and the bank
is likely to record a loan loss provision charge again in 2004. Consumer loans are a particular target for growth in
2004, on which loss rates are currently very low, but where BOM's track record is very short.
BOM was founded in 1995 and has always been majority-owned by the government of the City of Moscow.
Bank of Moscow was ranked seventh by asset volume in the Interfax- 100 list of Russia's banks in 2003. The list
is compiled by the Interfax Center for Economic Analysis. [RU ASIA EUROPE EEU EMRG BNK AAA] me
[Interfax] |
RUSSIA IN FACTS
