Fitch Ratings has revised eight Ukrainian banks' Outlooks to Positive from Stable and affirmed all of their ratings, the rating agency has reported.
The statement notes that the rating actions follow the agency’s revision of the Outlooks on Ukraine’s Long-term foreign and local currency Issuer Default Ratings (IDR) to Positive from Stable.
Fitch revised the outlooks of Ukrsotsbank, Bank Forum, ProCredit Bank Ukraine, Pravex-Bank, VTB Bank, the State Export-Import Bank of Ukraine (Ukreximbank), the State Savings Bank of Ukraine (Oschadbank, all based in Kyiv) and UkrSibbank (Kharkiv).
The statement says that the revision of the Outlooks on UkrSibbank, Ukrsotsbank, Bank Forum, ProCredit Bank Ukraine, Pravex-Bank and VTB Bank (Ukraine) reflects the increased likelihood of an upgrade of Ukraine’s Country Ceiling (‘B’) following the revision of the sovereign Outlook.
Fitch said UkrSibbank is almost 100%-owned by France’s BNP Paribas; Ukrsotsbank is 95%-owned by Italy-based UniCredit S.p.A. through its Vienna subsidiary UniCredit Bank Austria AG (‘A’/Stable); Bank Forum is majority-owned (96%) by Germany’s Commerzbank AG; ProCredit Bank Ukraine is controlled (60% of voting stock) by Germany’s ProCredit Holding AG; Pravex-Bank is 100%-owned by Italy’s Intesa Sanpaolo S.p.A. and VTB Bank Ukraine is more than 99%-owned by Russia’s JSC Bank VTB.
The revision of the Outlooks on Ukreximbank and Oschadbank reflects Fitch’s view that while the ability of the government to provide support in case of need remains limited, as reflected by the ‘B’ sovereign Long-term IDRs, it is now likely to improve, as reflected by the Positive Outlook.
"The Viability Ratings of the foreign-owned banks reflect still weak asset quality and potential need for further recapitalisation. The ratings also consider the banks’ generally depressed profitability as a result of continued deleveraging, falling market rates and high credit risk costs," reads the statement.
According to Fitch, each of these banks reported high levels of NPLs (loans overdue for more than 90 days) and restructured exposures.
"On average, these loans accounted for a combined 55% of end-Q1, 2011 portfolios, with NPLs alone at around 20% (end-H1, 2010: 56% and 18%, respectively)," reads the statement.
At the same time, the numbers at the individual banks differ significantly around the means. ProCredit Ukraine’s higher Viability Rating reflects the bank’s materially lower level of NPLs, although the level of its loan restructuring has been in line with its peers.
Fitch notes that inflows of new problem assets were limited in Q1, 2011, after only moderate growth in H2, 2010, suggesting loan arrears have bottomed out.
"Loan loss absorption capacity has been improving to varying degrees to end-Q1, 2011 as banks have built up reserves and received new capital. However, it still may prove insufficient, in Fitch’s view, given the scale of problems, while the borrowers’ financial position has yet to stabilise," reads the statement.
Efficient management of problem exposures in the broadly favourable operating environment, along with the continued strengthening of capital positions, could generate upside potential for the banks’ Viability Ratings, Fitch said.
