December 5, 2017 / 12:56 PM / a year ago

Fitch Affirms 8 Russian Foreign-Owned Banks at 'BBB-'; Outlook Positive

(The following statement was released by the rating agency) MOSCOW, December 05 (Fitch) Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of eight foreign-owned Russian banks at 'BBB-' with Positive Outlooks. They are HSBC Bank (RR) LLC, Credit Agricole CIB AO, ING Bank (Eurasia) JSC, JSC Nordea Bank, Danske Bank (Russia), SEB Bank JSC, Bank of China (Russia) and China Construction Bank (Russia) Limited. Fitch has also withdrawn the ratings of Credit Agricole CIB AO for commercial reasons. Accordingly, Fitch will no longer provide ratings or analytical coverage for the bank. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS The banks' IDRs, Support Ratings and senior debt ratings (where assigned) continue to reflect Fitch's view that their financially strong parents will likely have a high propensity to support the subsidiaries, if needed. The respective banks are fully owned by HSBC Bank Plc (AA-/Stable), Credit Agricole (A+/Stable), ING Bank N.V. (A+/Stable), Nordea Bank AB (AA-/Stable), Danske Bank AS (A/Stable), Skandinaviska Enskilda Banken AB (AA-/Stable), Bank of China Ltd. (A/Stable) and China Construction Bank Corporation (A/Stable). Fitch's view on the high propensity of the parent banks to support their subsidiaries takes into account the full ownership, the high level of integration between parents and subsidiaries, their common branding (implying reputational risks in case of subsidiary defaults) and the limited size of the subsidiaries, making any potential support manageable for the parent groups. The banks' Foreign-Currency IDRs are capped by Russia's Country Ceiling (BBB-), which reflects the probability of transfer and convertibility restrictions, and the risk the subsidiaries may not be able to benefit from parent support to service their foreign-currency obligations. The banks' Local-Currency IDRs, where assigned, also take into account Russian country risks. Fitch would likely rate the subsidiary banks one notch lower than their respective parents without the Country Ceiling. Fitch has not assigned Viability Ratings (VRs) to the subsidiary banks due to the high management and operational integration with their parent institutions. This implies, to varying degrees at different banks, parental credit approvals, group guarantees largely covering the subsidiary's credit risks, significant funding and other operations conducted with the parent (e.g. foreign-currency hedging), the subsidiary's high reliance on the broader group for business origination, and significant fungibility between the parent's and the subsidiary's balance sheets. RATING SENSITIVITIES The Positive Outlook on the banks' IDRs reflects that on the sovereign. The banks' IDRs, Support Ratings and senior debt ratings could be upgraded if Russia's sovereign ratings and Country Ceiling are upgraded. Conversely, a revision of the sovereign Outlook to Stable would lead to the same actions on the banks, while a downgrade of the sovereign would trigger a downgrade of the banks. The subsidiary ratings could also be downgraded in case of (i) a downgrade of a parent bank rating to 'BBB-' or below, (ii) the sale of a subsidiary bank to a lower-rated owner, or (iii) a considerable weakening, in Fitch's view, of the propensity of a parent bank to support its subsidiary. However, each of these scenarios is currently viewed as unlikely by Fitch. The rating actions are as follows: HSBC Bank (RR) LLC, Bank of China (Russia), China Construction Bank (Russia) Limited Long-Term Foreign and Local Currency IDRs: affirmed at 'BBB-'; Outlooks Positive Short-Term Foreign Currency IDR: affirmed at 'F3' Support Rating: affirmed at '2' Credit Agricole CIB AO Long-Term Foreign- and Local-Currency IDRs: affirmed at 'BBB-', Outlooks Positive; withdrawn Short-Term Foreign- and Local-Currency IDRs: affirmed at 'F3'; withdrawn Support Rating: affirmed at '2'; withdrawn ING Bank (Eurasia) JSC Long-Term Foreign and Local Currency IDRs: affirmed at 'BBB-'; Outlooks Positive Short-Term Foreign Currency IDR: affirmed at 'F3' Support Rating: affirmed at '2' Senior unsecured debt: affirmed at 'BBB-' JSC Nordea Bank, Danske Bank (Russia) and SEB Bank JSC Long-Term Foreign-Currency IDR: affirmed at 'BBB-'; Outlook Positive Short-Term Foreign-Currency IDR: affirmed at 'F3' Support Rating: affirmed at '2' Contact: Primary Analysts Roman Kornev (Credit Agricole CIB AO, Bank of China (Russia), China Construction Bank (Russia)) Director +7 495 956 7016 Fitch Ratings CIS Limited 26 Valovaya Street, Moscow 115054 Anna Erachina (HSBC Bank (RR) LLC, ING Bank (Eurasia) JSC, JSC Nordea Bank, Danske Bank (Russia), SEB Bank JSC) Associate Director +7 495 956 7063 Fitch Ratings CIS Limited 26 Valovaya Street, Moscow 115054 Secondary Analysts Roman Kornev (HSBC Bank (RR) LLC) Director +7 495 956 7016 Ilya Sarzhin (ING Bank (Eurasia) JSC, JSC Nordea Bank, Bank of China (Russia), China Construction Bank (Russia) Limited) Analyst +7 495 956 9983 Artem Beketov (Credit Agricole CIB AO, Danske Bank (Russia), SEB Bank JSC) Analyst +7 495 956 9932 Committee Chairperson James Watson Managing Director +7 495 956 6657 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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