Fitch Affirms 8 Russian Foreign-Owned Banks at 'BBB-'; Outlook Stable


12 Dec 2016 11:53 AM


Fitch Ratings-Moscow/London-12 December 2016: Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of HSBC Bank (RR) LLC, Credit Agricole CIB AO, ING Bank (Eurasia) JSC, JSC Nordea Bank, Danske Bank (Russia), SEB Bank JSC, Bank of China (Russia) and China Construction Bank (Russia) Limited at 'BBB-' with Stable Outlooks. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS
The banks' IDRs, Support Ratings and senior debt ratings (where assigned) reflect Fitch's view of the high probability that the rated entities will receive support from their financially strong parents, in case of need. The banks are fully owned by HSBC Bank Plc (AA-/Stable), Credit Agricole (A/Positive), ING Bank N.V. (A+/Stable), Nordea Bank AB (AA-/Stable), Danske Bank AS (A/Stable), Skandinaviska Enskilda Banken AB (AA-/Stable), Bank of China Ltd. (A/Stable) and China Construction Bank Corporation (A/Stable), respectively.

Fitch's view on potential support takes into account the full ownership, high level of management and operational integration between parents and subsidiaries, their common branding (implying high reputational risks in case of a subsidiary's default) and a very low cost of potential support given the limited size of subsidiary banks (less than 1% of group assets).

The banks' foreign currency IDRs are capped by Russia's Country Ceiling (BBB-), while the local currency IDRs, where assigned, also take into account Russian country risks. The Country Ceiling captures the probability of transfer and convertibility restrictions being imposed by the sovereign and reflects the risk that the subsidiary banks may not be able to benefit from parent support to service their foreign currency obligations. Without the Country Ceiling and other country risks, Fitch would likely rate the subsidiary banks one notch lower than their parents.

Fitch has not assigned Viability Ratings to the subsidiary banks because of the high level of management and operational integration with parent entities, active participation of the parent institutions in the subsidiaries' credit approval processes, parent guarantees provided for most of the subsidiaries' credit exposures, significant funding provided by parents to subsidiaries and/or other operations conducted with the parent entities (e.g. foreign-currency hedging), dependence of subsidiary business origination on the broader group, and significant fungibility between parent and subsidiary balance sheets.

The affirmation of the banks' National Ratings at 'AAA(rus)' reflects Fitch's view that the banks remain among the strongest credits in Russia. The Stable Outlooks on the National Ratings reflect those on the banks' Long-term IDRs.

RATING SENSITIVITIES
The IDRs and Outlooks are sensitive primarily to a change in Russia's sovereign rating. Upside potential for the banks' ratings is currently limited, since they are constrained by Russia's Country Ceiling (BBB-) and other country risks. Conversely, a downgrade of the sovereign would trigger a downgrade of the banks.

A subsidiary bank could also be downgraded if (i) a parent bank is downgraded to 'BBB-' or below; (ii) a parent bank sells its Russian subsidiary to a more lowly-rated owner; or (iii) Fitch sees a significant weakening of the propensity of the parent bank to support its subsidiary. However, Fitch does not currently anticipate any of these scenarios.

The rating actions are as follows:

HSBC Bank (RR) LLC, Bank of China (Russia), China Construction Bank (Russia) Limited
Long-Term Foreign and Local Currency IDRs: affirmed at 'BBB-'; Outlooks Stable
Short-Term Foreign Currency IDR: affirmed at 'F3'
National Long-Term rating: affirmed at 'AAA'(rus); Outlook Stable
Support Rating: affirmed at '2'

Credit Agricole CIB AO
Long-Term Foreign and Local Currency IDRs: affirmed at 'BBB-'; Outlooks Stable
Short-Term Foreign and Local Currency IDRs: affirmed at 'F3'
National Long-Term rating: affirmed at 'AAA'(rus); Outlook Stable
Support Rating: affirmed at '2'

ING Bank (Eurasia) JSC
Long-Term Foreign and Local Currency IDRs: affirmed at 'BBB-'; Outlooks Stable
Short-Term Foreign Currency IDR: affirmed at 'F3'
National Long-Term rating: affirmed at 'AAA'(rus); Outlook Stable
Support Rating: affirmed at '2'
Senior unsecured debt: affirmed at 'BBB-'/'AAA'(rus)

JSC Nordea Bank, Danske Bank (Russia) and SEB Bank JSC
Long-Term Foreign Currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-Term Foreign Currency IDR: affirmed at 'F3'
National Long-Term rating: affirmed at 'AAA'(rus); Outlook Stable
Support Rating: affirmed at '2'

Contact:
Primary Analysts
Olga Ignatieva (HSBC Bank (RR) LLC)
Senior Director
+7 495 956 69 06
Fitch Ratings CIS Ltd
26 Valovaya Street
Moscow 115054

Roman Kornev (Danske Bank (Russia), SEB Bank JSC)
Director
+7 495 956 7016
Fitch Ratings CIS Ltd
26 Valovaya Street
Moscow 115054

Anton Lopatin (Credit Agricole CIB AO)
Director
+7 495 956 7096
Fitch Ratings CIS Ltd
26 Valovaya Street
Moscow 115054

Sergey Popov (Bank of China (Russia), China Construction Bank (Russia) Limited)
Associate Director
+7 495 956 9981
Fitch Ratings CIS Ltd
26 Valovaya Street
Moscow 115054

Anna Erachina (JSC Nordea Bank, ING Bank (Eurasia) JSC)
Associate Director
+7 495 956 7063
Fitch Ratings CIS Ltd
26 Valovaya Street
Moscow 115054

Secondary Analysts
Artem Beketov (HSBC Bank (RR) LLC, Credit Agricole CIB AO, Danske Bank (Russia), SEB Bank JSC)
Analyst
+7 495 956 9932

Ilya Sarzhin (ING Bank (Eurasia) JSC, JSC Nordea Bank, Bank of China (Russia), China Construction Bank (Russia) Limited)
Analyst
+7 495 956 9983

Committee Chairperson
Alexander Danilov
Senior Director
+7 495 956 2408

Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com; Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com.

Additional information is available on www.fitchratings.com

Applicable Criteria
Global Bank Rating Criteria (pub. 25 Nov 2016)

Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
Solicitation Status
Endorsement Policy


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