Fitch: Ukraine - Little Impact Yet on Rated Banks But Risks Remain

Fitch Ratings, the international rating agency, today says the current political situation and recent banking sector turbulence in Ukraine have so far not had a significant impact on the creditworthiness of the banks rated by the agency (see list below). However, given the re-run of the second round of the Presidential election on 26 December, these (and other) banks continue to face considerable risks.

Following an increase in deposit withdrawals and the National Bank of the Ukraine’s (“NBU”) measures to preserve sector liquidity (see announcement on 2 December at www.fitchratings.com), in the wake of the disputed late November presidential elections, Fitch has continued to monitor the banks’ balance sheets and liquidity profiles. Although they have seen some outflow of retail deposits, these have not typically been material. Nevertheless, the banks have taken measures to conserve liquidity.

At the same time, the situation in the Ukrainian banking sector remains very difficult, as reflected in the effective disappearance of the domestic interbank market as a source of unsecured liquidity and, Fitch understands, the granting by the NBU of stabilisation loans to some of the country’s banks. Furthermore, the re-run on 26 December of the second round of the Presidential election, whatever the result, could lead to a further escalation of political tension. This could bring with it the risk of renewed increases in deposit withdrawals (albeit probably mainly from current accounts, following the NBU’s decree that seeks to restrict early withdrawals of term deposits) and pressure on bank liquidity.

Thus, while Fitch notes that the very weak ratings of Ukrainian banks continue to reflect the risks they currently face and their vulnerability to shocks, the agency will continue to monitor the situation closely in the days before and after the election. Negative rating actions could still follow if there is a marked deterioration in the banks’ liquidity profiles or other payment difficulties are experienced.

Fitch has the following ratings for Ukrainian banks:

CJSC Privatbank: Long-term 'B-' (B minus) Stable Outlook, Short-term 'B', Individual 'D' and Support '5'.

First Ukrainian International Bank: Long-term 'B-' (B minus) Stable Outlook, Short-term 'B', Individual 'D' and Support '5'.

Industrialbank: Long-term 'CCC' Stable Outlook, Short-term 'C', Individual 'D/E' and Support '5'.

JSIB Ukrsibbank: Long-term 'B-' (B minus) Stable Outlook, Short-term 'B', Individual 'D/E' and Support '5'.

OJSC The State Export-Import Bank of Ukraine ("Ukreximbank"): Long-term 'B+' Stable Outlook, Short-term 'B', Individual 'D/E' and Support '4'. Ukreximbank's Long-term rating is underpinned not by intrinsic factors, but rather by the support it can expect to receive from the Ukrainian authorities, in case of need.

ProCredit Bank (Ukraine): Long-tem 'B+' Stable Outlook, Short-term 'B', Individual 'D/E', Support ‘4’ and Long-term local currency 'BB-' (BB minus). ProCredit Bank's Long-term rating is underpinned by the support it can expect to receive from its shareholders, in particular IMI Internationale Micro Investitionen (rated 'BBB-' (BBB minus)).

Bank Credit Dnepr: Support '5'.