Fitch Affirms VTB Armenia At ‘BB+’; ACBA Credit Agricole At ‘BB’

FITCH AFFIRMS VTB ARMENIA AT ‘BB+’; ACBA CREDIT AGRICOLE AT ‘BB’

ArmInfo
2009-05-06 14:30:00

Ratings has today affirmed two Armenian banks, VTB Bank Armenia (VTBA)
and ACBA- Credit Agricole Bank (ACBA), at Long-term Issuer Default
(IDR) ‘BB+’ and ‘BB’, respectively. The Outlooks on both banks
are Stable. The Individual Ratings of VTBA and ACBA have been also
affirmed at ‘D/E’ and ‘D’, respectively. A full list of rating actions
is provided at the end of this commentary, Fitch Rating reported.

The IDRs of both banks reflect Fitch’s view of the moderate probability
of support being forthcoming, if required, from their owners. Fitch
believes Russia’s JSC VTB Bank (VTB; ‘BBB’/Negative) would have a
strong propensity to support VTBA, in case of need, due to its 100%
ownership, the strategic importance of CIS markets for VTB and the
small size of VTBA relative to its parent.

In respect to ACBA, the probability of support being forthcoming
from Credit Agricole (CA; ‘AA-‘ (AA minus)/Stable) is undermined by
CA’s minority stake (28%) and the fact that the Armenian market does
not appear to be of high importance for CA; these considerations
are reflected in the lower Long-term IDR of ACBA, relative to
VTBA. Nevertheless, support is factored into the ratings of ACBA due
to brand association, the close involvement of CA in establishing
and supervising ACBA and ACBA’s relatively small size.

The Individual Ratings of both banks reflect rapid loan growth in
recent years, the high proportion of foreign currency loans and
the high-risk operating environment, but also take into account
the solid capitalisation of both banks and their broad domestic
franchises. However, the high concentration of VTBA’s loan book, its
relatively high exposure to the vulnerable construction sector, the
somewhat higher current loan impairment level, larger tier 2 component
in capital and much higher reliance on shareholder funding/liquidity
support make the bank weaker on a standalone basis, which is reflected
in its Individual Rating of ‘D/E’. The Individual Rating of ACBA at
‘D’ considers the high granularity of its loan portfolio, diversified
funding base and stable liquidity position, high profitability and
good corporate governance.

ACBA is Armenia’s largest bank by assets and loans, with market shares
of 12% and 13%, respectively, at end-2008. It has a leading position
in agricultural lending with a 71% market share. The biggest stake
in the bank is owned by CA and the remainder is distributed among 10
regional agricultural unions.

VTB held 11% of sector loans and 5.9% of retail deposits at
end-2008. The bank has an extensive branch network covering all
regions of Armenia and is 100%-owned by VTB.

The rating actions are as follows:

Bank VTB Bank (Armenia) CJSC Long-term foreign and local currency
IDR: affirmed at ‘BB+’; Outlook Stable Short-term foreign and local
currency IDR: affirmed at ‘B’ Individual Rating: affirmed at ‘D/E’
Support Rating: affirmed at ‘3’ ACBA-Credit Agricole Bank Long-term
foreign currency IDR: affirmed at ‘BB’; Outlook Stable Short-term
foreign currency IDR: affirmed at ‘B’ Individual Rating: affirmed at
‘D’ Support Rating: affirmed at ‘3’