BRAMA, Mar 31, 2006, 10:00 am ET|
Fitch Upgrades Ukraine's Bank Mriya To 'BB-'; Off Rating Watch Positive
Fitch Ratings-London/Moscow-31 March 2006: Fitch Ratings has today upgraded Ukraine-based Bank Mriya's ratings to foreign currency Issuer Default 'BB-' (BB minus) from 'CCC+', Short-term 'B' from 'C' and Support '3' from '5'. All the ratings are removed from Rating Watch Positive. It has also assigned the bank a local currency Issuer Default rating ("IDR") of 'BB'. The Individual rating is affirmed at 'D/E'. Stable Outlooks are assigned to Mriya's IDRs. These rating actions follow the recent completion of the acquisition of a 98% stake in the bank by Russia's Vneshtorgbank ("VTB", IDR 'BBB').
The upgrade reflects Fitch's view of VTB's greater ability - as indicated by its IDR - compared with that of Mriya's previous owners, to provide the bank with support in case of need. However, Mriya's foreign currency IDR is constrained by Ukraine's 'BB-' (BB minus) Country Ceiling while the local currency IDR also takes into account country risks.
The Individual rating reflects Mriya's small size and limited franchise, high borrower concentrations and potentially vulnerable liquidity, as well as certain weaknesses in the operating environment. However, it also takes into account the bank's sound performance and low levels of asset impairment to date. Fitch notes that the acquisition by VTB could result in positive developments in respect to several aspects of the bank's stand-alone financial strength, although in the agency's view these improved prospects are not sufficient to justify an immediate action on the Individual rating. While a merger of Mriya with VTB Ukraine is also being considered, the comparative size of the banks (Mriya is more than three times larger) means that the former would to a greater degree determine the financial strength of any merged entity.
Mriya is a relatively small bank, even by Ukrainian standards, accounting for approximately 1% of sector assets and equity. The main focus is on SME business, but retail deposits are also significant. The smaller VTB Ukraine (about 0.3% of sector assets) has to date focused more on providing services to local partners and subsidiaries of VTB's Russian corporate clients.
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