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Fitch Upgrades Three Ukrainian Banks

January 24, 2005 | Cbonds

Fitch Ratings, the international rating agency, has today upgraded the ratings of three Ukrainian banks (listed below). This follows the recent upgrade of Ukraine’s Long-term foreign and local currency ratings and Country Ceiling to 'BB-' (BB minus) from 'B+' (please see announcement: Fitch Upgrades Ukraine To 'BB-' dated 21 January 2005).

JSC The State Export-Import Bank of Ukraine ("Ukreximbank"):
Long-term rating upgraded to 'BB-' (BB minus) from 'B+', Support changed to '3' from '4'. The Short-term rating is affirmed at 'B' and the Individual at 'D/E'. The Long-term Outlook is Stable.

The upgrade of the Long-term rating and the change in Support rating reflect the government’s improved ability to support Ukreximbank should the bank run into any financial difficulty. Ukreximbank is 100%-owned by the Ukrainian state (represented by the Cabinet of Ministers of Ukraine) and has received liquidity and regulatory support from the National Bank of Ukraine in the past, following asset quality problems with several, large government-directed or related loans in the 1990s.

CJSC "ProCredit Bank" ("ProCredit Ukraine"):
Long-term foreign currency to 'BB-' (BB minus) from 'B+', Long-term local currency to ‘BB’ from 'BB-' (BB minus), Support changed to '3' from '4'. The Short-term foreign and local currency are affirmed at 'B' and the Individual at 'D/E'. The Long-term Outlook is Stable.

The Long-term, Short-term and Support ratings of ProCredit Ukraine are based on Fitch's view of the potential support the bank is likely to receive from its owners, in particular, Internationale Micro Investitionen (“IMI”, Long-term rating ‘BBB-’ (BBB minus)) in case of need. The Support rating now fully reflects Fitch’s belief that the owners have a strong propensity to support ProCredit Ukraine. However, such support could be limited by factors relating to the Ukraine, therefore the Long-term foreign currency rating continues to be constrained by Ukraine’s Country Ceiling.

CJSC Privatbank's ("Privat"):
Long-term rating to 'B' from 'B-' (B minus), Support changed to '4' from '5'. The Short-term rating is affirmed at 'B' and the Individual at ‘D’. The Long-term Outlook is Stable.

The upgrade in Privat's Long-term rating and change in Support rating reflect the increased, although still limited, ability of the Ukrainian authorities to provide support, as reflected in the upgrade of Ukraine’s Long-term ratings. In view of Privat’s size and importance to the Ukrainian banking sector, Fitch believes there would be some propensity of the Ukrainian authorities to support the bank in case of need.

Ukreximbank was founded in 1992. By assets, Ukreximbank was the sixth largest Ukrainian bank at end-2003, with a network of 73 branches and outlets across Ukraine. In addition to its commercial banking activities, Ukreximbank is the only Ukrainian bank that acts as a financial agent of the Ukrainian government in attracting and servicing international loans to Ukrainian corporates, which are extended under state guarantee.

Founded in early 2001, ProCredit Ukraine forms part of a global network of 18 banks, which were set up by private and public sector investors to provide financing to micro- and SME customers in developing markets. ProCredit Ukraine’s current shareholders are: Frankfurt-based IMI, which is responsible for the bank’s administrative and risk management functions (20%); US-based Western NIS Enterprise Fund (20%); the EBRD (19.99%); World Bank Group member IFC (19.99%); KfW (7.28%); and the German-Ukrainian Fund (GUF) (12.71%). By mid-2005, IMI is set to acquire the stakes currently held by KfW and IFC (both key shareholders of IMI) and GUF, as a result of which IMI is set to become ProCredit Ukraine’s majority shareholder with around a 60% stake.

Privat is the largest bank in Ukraine with an approximately 11% share of sector’s assets, 14% of retail and 11% of corporate funding at end-2004. Privat is based in Dnepropetrovsk, a large city in south-east Ukraine.

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