Moody’s to cut Russia’s VTB if asset quality, liquidity falls

Prime News

Moody’s international ratings agency believes that the deposit and debt ratings of Russia’s state-controlled VTB Bank could be decreased, if capitalization, asset quality and liquidity worsen, according to the agency’s provisional survey released late Monday.

The bank’s ratings could also be decreased if the government cuts its holding, which could lead to a drop in the level of state financial aid, the agency also said.

The improvement of the bank’s capitalization, asset quality, and liquidity is unlikely to lead to an increase of its ratings or the ratings of its affiliates, as their forecast is negative.

At present, long-term ratings for VTB Bank and its affiliates are at Baa1. In July 2011, the agency revised down its forecast for the bank’s ratings to negative from stable. The negative forecast for the financial strength rating, which is at D-, could be attributed to the risk of a decrease in the bank’s capitalization due to the consolidation with the struggling Bank of Moscow.

The government sold a 10% stake in VTB Bank in February 2011, cutting its holding to 75.5%, and plans to sell 10% more this year.

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