Fitch revises 5 Belarusian Banks’ Outlooks to Negative on Sovereign Action

<p> MINSK, Nov 18 - PrimePress. Fitch Ratings has revised Outlooks for Belarusbank (BBK), Belinvestbank (BIB), JSC Development Bank of the Republic of Belarus (DBRB), BPS-Sberbank (BPS) and Bank BelVEB (BVEB) to Negative fr om Stable while affirming the Long-Term Issuer Default Ratings (IDR) at ‘B.’ </p> <p>   </p> <p> “The rating action reflects a similar rating action on Belarus's sovereign Long-Term IDRs. The sovereign rating action reflects Fitch's view that Belarus's greater political unrest after the recent election could lead to additional pressures on international reserves and deposit outflows, increasing risks for macroeconomic and financial stability,” reads the statement. </p> <p>   </p> <p> The Negative Outlook on these ratings reflects the potentially weaker sovereign financial position, which would undermine its ability to provide support to the banks. Fitch expects sovereign FX reserves to decline to $6.8 billion in 2021 from a forecast $7.6 billion at end-2020, and further to $6.2 billion in 2022. This, in light of the sovereign’s own near-term external debt repayments and potentially significant contingent liabilities associated with the wider public sector, could constrain financial flexibility of the authorities to provide support, in particular in foreign currency, in case of need. </p> <p>   </p> <p> These banks’ domestic FX deposits (an aggregate $5.7 billion at end-10M20), sizeable FX non-deposit liabilities (including short-term $1.4 billion), and their own limited highly liquid FX assets ($0.6 billion) could also make them difficult to support by the government, especially in a deep stress scenario. Both BBK and BIB experienced deposit volatility during the market turbulence in 2Q20 and 3Q20, albeit the associated impact on their deposit base and liquidity profile has been contained. </p> <p>   </p> <p> The propensity of the authorities to support these banks remains high, in Fitch's view, given (1) majority state ownership, (2) BBK's exceptional systemic importance and policy roles (BBK and DBRB), (3) the government's subsidiary liability on DBRB's bonds and the record of support to the three banks to date. </p> <p>   </p> <p> The Long-Term IDRs of BPS and BelVEB are driven by potential institutional support from their foreign shareholders, Sberbank (BBB/Stable) and VEB.RF (BBB/Stable). Despite the parent banks’ high ability and propensity to support BPS and BelVEB, their ‘B’ Long-Term IDRs are capped by Belarus’ ‘B’ Country Ceiling. The Negative Outlook on the Long-Term IDRs reflects Belarusian sovereign's potentially weaker financial position, which could cause an increase in Belarusian transfer and convertibility risk and therefore lim it the extent to which parental support could be utilized to service the banks' own obligations. </p> <p>   </p> <p> The banks’ IDRs and Support Ratings could be downgraded if Belarus's sovereign ratings are downgraded and the Country Ceiling is revised down. The IDRs of BBK, BIB and DBRB could also be downgraded, and hence notched off the sovereign, if timely support is not provided, when needed. </p> <p> An upgrade of the IDRs is unlikely in the near term given the Negative Outlook on Belarus’ sovereign rating could, individually or collectively, lead to positive rating action/upgrade. </p> <p>   </p> <p> As previously reported, on November 13, Fitch revised the outlook for the long-term issuer default rating (IDR) of Belarus in foreign exchange from ‘Stable’ to ‘Negative’ and affirmed the IDR at ‘B.’ The revision of the Outlook to Negative reflects Fitch's view that Belarus's post-election political crisis has increased vulnerabilities emanating from relatively low international foreign exchange reserves and a weak banking sector. In Fitch’s view, there remains potential for an intensification of the political crisis. The political crisis creates risks of renewed social unrest, strikes, additional diplomatic tensions with Western countries and potentially harsher sanctions. </p> <p>   </p> <p> The Development Bank of the Republic of Belarus was established in 2011 by presidential decree No.261 of June 21, 2011 to increase the efficiency of projects included in government programs, reduce the time of their implementation and cost recovery. It finances government programs on its own behalf and at its own expense on terms of urgency, payment and repayment. The state holds 96.224% in the bank’s statutory capital. </p> <p>   </p> <p> Belarusbank, Belarus’ largest bank, was founded in July 1991, and was transformed in October 1995 through a merger with Sberbank of Belarus. The state holds the 99.95% share in the authorized capital of the bank. </p> <p>   </p> <p> Belarusian Bank for Development and Reconstruction Belinvestbank OJSC was established on September 3, 2001 as a result of reorganization through the merger of Belbiznesbank OJSC and Development Bank of the Republic of Belarus OJSC. The state holds the 99.08% share in the authorized capital of the bank. The bank was assigned to the 1st group of systemic importance. Over 110 divisions of the bank are currently operating in Belarus. </p> <p>   </p> <p> BPS-Sberbank OJSC is one of Belarus’ largest banks in terms of assets. Sberbank PJSC holds 98.43% of its shares. </p> <p>   </p> <p> BelVEB Bank OJSC was registered by the National Bank of the Republic of Belarus on December 12, 1991. The share of the Russian state corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank) in the authorized capital of BelVEB Bank OJSC makes up 97.52%; Minsk City Territorial State Property Fund – 2.29%. BelVEB was assigned to the systemic significance Group I. End </p>

2020-11-18

Primepress