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Fitch: CIS Bank Sector Outlooks Diverge on Economies, Currencies
December 9, 2016 / 12:48 PM / 7 months ago

Fitch: CIS Bank Sector Outlooks Diverge on Economies, Currencies

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(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 2017 Outlook: CIS and Georgian Banks here MOSCOW/LONDON, December 09 (Fitch) Sector outlooks for CIS and Georgian banks for 2017 are diverging, reflecting how far recent recessions and currency devaluations will continue to affect lender performance, Fitch Ratings says. Our sector outlooks are now stable in Russia, Armenia and Ukraine, where we do not expect further significant weakening of banks' financial metrics. Sector outlooks in Kazakhstan, Azerbaijan and Belarus remain negative. These countries have experienced sharp currency depreciations and foreign-currency (FC) lending is high, while regulators have yet to fully quantify asset-quality risks and promote recapitalisation. Outlooks in Georgia and Uzbekistan remain Stable. Russian banks' sector outlook mirrors the stabilisation in the Russian economy and the rouble. Most banks' pre-impairment profit should be enough to reserve problem loans without hitting capital, although bottom-line earnings will be muted at most banks and lending growth will be limited. The central bank will take steps to absorb excess rouble liquidity, while FC liquidity will remain sound and sufficient to allow banks and corporate borrowers to meet external debt repayments. We expect Ukrainian banks' financial metrics to stabilise at weak levels. The regulator's asset-quality review has reduced the potential for negative shocks, but large provisioning, and hence capital, shortfalls mean bank recapitalisation plans and regulatory forbearance on capital levels remain important drivers of the sector outlook. Liquidity has stabilised with deposit flows and the restructuring (maturity extensions) of bank Eurobonds. Kazakh banks' liquidity profiles are robust, but capitalisation is vulnerable (with the exception of Halyk Bank) considering moderate provisions on distressed loans, risks from FC lending and the failure to clean up balance sheets. Potential resolution measures are unclear ahead of the National Bank of Kazakhstan's planned asset-quality review, now scheduled for the end of 2017. Azerbaijan's banks face capital and liquidity pressures from currency mismatches and asset-quality deterioration in heavily dollarised loan books. Material capital shortfalls and large losses mean we expect further bank failures and clean-up measures next year. However, substantial state support for International Bank of Azerbaijan remains in place and we expect the clean-up of the bank's balance sheet to be completed next year. Rating Outlooks in the region are mostly Stable, as ratings are already low, performance and financial metrics in some markets are stabilising and most sovereign Outlooks are Stable. The Negative Outlook in Azerbaijan reflects a combination of deteriorating bank profiles and the Negative Outlook on the sovereign rating. Further information is contained in our "2017 Outlook: CIS and Georgian Banks" report, published today, available by clicking on the link. Contact: James Watson Managing Director Financial Institutions +7 495 956 6657 Fitch Ratings CIS Limited Business Centre Light House, 6th Floor 26 Valovaya St. Moscow 115054 Russia Alexander Danilov Senior Director Financial Institutions +7 495 956 2408 Olga Ignatieva Senior Director Financial Institutions +7 495 956 6906 Konstantin Alekseenko Analyst Financial Institutions +7 495 956 2401 Mark Brown Senior Analyst Fitch Wire +44 20 3530 1588 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com; Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. 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Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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