Standard & Poor’s demotes Alfa Bank’s rating

24 December 2008 (11:15)

Standard & Poor’s, the international rating agency, demoted Alfa Bank’s contractor’s long-term credit rating from BB to BB-, while Alfa Bank’s national scale rating was decreased from ruAA to ruAA-. The bank’s long-term rating was affirmed at B, with Stable rating outlook.

‘This drop has to do with the Russian economy and the banking sector’s systemic risks that have affected Alfa Bank’s business and prospects somewhat badly. For one, the bank’s asset quality, resource base, and capitalization got worse, causing the business’s profitability to decrease,’ says Standard & Poor’s analyst Elena Romanova.

Alfa Bank acquired over 75% of Bank Severnaya Kazna’s shares on November 30, 2008; the latter had experienced grave liquidity problems in the recent past.

‘The Stable rating outlook reflects the negative impact of the financial market and the country’s economy juxtaposed with its strong position on the Russian market, an impressive client base, and the potential shareholder and state support. This support has already helped the bank to fight its liquidity trouble and make up for the greater external risks,’ Romanova adds.

‘We expect the bank’s annual report to look worse than the results available for the first half of 2008, with the bank’s weakened financial development indicators possibly leading to lower ratings or Negative rating outlook. The rating could only be promoted if some dramatic improvements occur in the country’s financial sector,’ Standard & Poor’s reports.

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