18 May 2004 23:01
Moody`s rates Moscow Municipal Bank
MOSCOW. May 18 (Interfax) - Moody's Investors Service assigned first-time Ba2/NP foreign currency deposit
ratings and a D-Financial Strength Rating (FSR) to Moscow Municipal Bank - Bank of Moscow (BOM).
All ratings carry stable outlooks, the agency said in a press- release.
Underlining its commitment to BOM, the City of Moscow has
participated in all previous share capital increases of the bank,
Moody's said the Ba2/NP foreign currency deposit ratings imply a limited degree of support from the City of
Moscow, BOM's 62.69% majority owner and controlling shareholder. The rating agency believes that the city (rated
Ba1 by Moody's) would likely provide some support to BOM in a crisis situation.
The bank - which ranks among the top 10 Russian banks in terms of asset size - manages the city's budgetary
funds and serves as the main banking partner of the City's various agencies and related enterprises.
preserving at all times a controlling stake in BOM's equity. However, the size of any future support in a crisis
situation may be limited, and its timeliness uncertain Moody's adds, which explains why the rating is not at the
same level as that of the city.
Bank of Moscow's D-FSR is supported by the bank's strong franchise, especially in the Moscow region,
cemented by the city's majority ownership which confers an enhanced perception of safety and quality upon the
bank.
This perception of quality particularly benefits the bank's strong retail deposit franchise, second in the
country behind that of Sberbank. The bank's franchise is further enhanced by a strong branch presence, centred in
the Moscow region, and supported by a large network of regional branches.
The FSR is further supported by the bank's financial fundaments, as evidenced by its good profitability,
relatively low levels of non- performing loans, healthy capitalisation and provisioning and adequate liquidity
profile.
Moody's adds that the FSR is constrained by concerns over large levels of concentrations on both sides of the
balance sheet with regard to the city and city-controlled enterprises.
BOM was Russia's 7th biggest bank at the end of 2003 according to
the Interfax-100 ranking of the country's biggest banks by assets
Somewhat mitigating our concerns regarding these concentrations is the relatively lower-risk, lower-return nature of
the municipal exposures. However, Moody's remains particularly concerned over the large level of related-party
exposures, including lending that is not classified as related according to Central Bank of Russia guidelines, but is
extended to entities that are clearly under the influence of the controlling shareholder.
Moreover, the FSR is constrained by potential weaknesses in corporate governance, and by the possibility for
politically-motivated decisions, given the nature of the ownership and ultimate control via the mayor's office.
Finally, Russia's still potentially volatile operating environment remains one of the constraints on BOM's
ratings. At the same time, Moody's believes that the bank's ratings are sustained by gradually improving
economic conditions in the country.
compiled by the Interfax Center for Economic Analysis. [RU ASIA EUROPE EEU EMRG BNK AAA] pr
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