September 5, 2017 / 11:26 AM / 10 months ago

Moody's downgrades Russian bank Otkritie after bail-out

MOSCOW, Sept 5 (Reuters) - Credit rating agency Moody’s said on Tuesday it had downgraded Otkritie Bank after the Russian Central Bank stepped in last week to bail out the struggling lender.

Last month the agency placed Otkritie on review for a possible rating downgrade, fuelling concerns about the bank’s health.

A sustained run on its deposits then prompted the central bank to announce it was taking over control of Otkritie last week as part of a rescue package which could cost up to $7 billion.

Moody’s said it has downgraded the long-term foreign and local-currency senior unsecured debt and deposit ratings of Otkritie to B2 from Ba3.

“The Central Bank of Russia now has a number of policy tools at its disposal which range from the full support it has indicated, to a liquidation of the bank. Moody’s believes that a liquidation is very unlikely in view of the bank’s size,” it said in a statement.

Given Otkritie’s status as a “systematically important credit institution”, Moody’s also said it had revised the probability of government support for Otkritie’s senior creditors to “very high from moderate”.

“Nevertheless, Moody’s believes that Otkritie’s failure and the central bank’s due diligence will likely lead to significant losses and consequent reduction in capital,” it said.

Otkritie’s shares on the Moscow Exchange traded 1,191 roubles ($20.57) as of 1100 GMT, up 1.4 percent from the previous session. ($1 = 57.8885 roubles) (Reporting by Jack Stubbs; Editing by Andrey Ostroukh, Greg Mahlich)

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