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S&P Takes Ukrainian PrivatBank Off Watch; Affms Rtgs

January 26, 2005 | Cbonds


On Jan. 25, 2005 Standard & Poor's Ratings Services said it removed from CreditWatch and affirmed its 'B-/C' long- and short-term counterparty credit and certificate of deposit ratings on Ukraine-based PrivatBank. These ratings had been placed on CreditWatch on Dec. 2, 2004. At the same time, Standard & Poor's affirmed its 'B-' long-term rating on the Loan Participation Notes issued by Credit Suisse First Boston International (A+/Stable/A-1) for the purpose of financing a loan to PrivatBank. This rating was removed from CreditWatch on Dec. 14, 2004. The outlook on PrivatBank is stable.

The rating actions reflect the reduced political risk and uncertainty in Ukraine (B+/Stable/B) following the inauguration of Viktor Yushchenko as Ukrainian president on Jan. 23, 2005. In early December, Ukraine's central bank had imposed several measures, including limiting deposit withdrawals from commercial banks and imposing currency and payment restrictions, to prevent capital flight, deposit withdrawals, and banking system disruption.

"While some smaller banks reportedly suffered liquidity problems during the period, PrivatBank was able to maintain a satisfactory liquidity cushion, and also make a timely payment on its Eurobonds," said Standard & Poor's credit analyst Alwin Greder. "As the system stabilized, the central bank's controls, imposed in December, were lifted at year-end."

PrivatBank is the largest commercial bank in Ukraine, with assets of Ukrainian hryvnia (UAH) 14.2 billion ($2.7 billion at UAH5.18 to $1) at June 30, 2004. The bank has a 11.2% market share of customer loans, and 12.3% of customer deposits in Ukraine, and holds leading positions in retail banking (as at the end of 2004).

The stable outlook reflects Standard & Poor's expectations that the bank will increase the scope of its operations in strategic business areas, while avoiding any significant deterioration in capital leverage or loan quality. Sizable and long-standing improvement in capital adequacy, supported by higher recurring profitability, may have positive implications for the ratings and outlook on the bank. A weakening in core capitalization ratios would have negative ratings implications.

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