YEREVAN, March 23, /ARKA/. Moody’s Investors Service has today taken rating actions on the two Armenian banks — Ardshinbank CJSC and VTB Bank (Armenia). These actions follow the weakening of Armenia’s credit profile, as reflected by Moody’s downgrade of Armenia’s government debt rating to B1 from Ba3 on March 18, 2015.
Specifically, Moody’s downgraded Ardshinbank’s long-term local currency deposit rating and foreign-currency senior unsecured debt rating to B1 from Ba3. This was driven by downgrade of the bank’s Baseline Credit Assessment (BCA) to b1 from ba3, reflecting Moody’s view that the bank’s creditworthiness is highly correlated to that of its national government due to the shared exposure of their financial health to the country’s macroeconomic. All the bank’s ratings carry a stable outlook reflecting Ardshinbank’s resilience to challenging credit conditions and a stable outlook assigned to Armenian government ratings.
At the same time, the rating agency has also downgraded Ardshinbank’s and VTB Bank (Armenia)’s long-term foreign-currency deposit ratings to B2 from B1, following the downgrade of the ceiling for foreign-currency deposit ratings in Armenia.
The downgrade of Ardshinbank’s BCA takes into account Moody’s assessment of high linkages between the credit profiles of the Armenian government and the bank, given. The high degree to which the bank’s businesses depend on the domestic macroeconomic and financial environment, as 100% of Ardshinbank’s operations are originated in Armenia; (ii) the bank’s direct exposures to domestic sovereign debt, accounting for a sizable 43% of its shareholders’ equity as at year-end 2015; as well as (iii) certain reliance on international market-based funding — with 16% of the bank’s non-equity funding represented by Eurobonds — which is sensitive to change in investors’ perception of Armenia-based credit risks.
The downgrade of Ardshinbank’s foreign-currency deposit rating to B2 from B1 was driven by the lowering of Armenia’s foreign-currency deposit ceiling to B2 from B1.
All of the bank’s ratings carry a stable outlook, in line with the sovereign rating outlook.
The downgrade of VTB Bank (Armenia)’s foreign-currency deposit rating to B2 from B1 was driven by the lowering of Armenia’s foreign-currency deposit ceiling to B2 from B1. The bank’s long-term local currency deposit rating of Ba3, as well as its BCA of b2 remained unchanged. All of the bank’s ratings carry a negative outlook.
There is limited positive pressure of the ratings of Ardshinbank and VTB Bank (Armenia) as reflected by the rating actions taken today and a negative outlook attached to VTB Bank (Armenia)’s ratings.
The bank ratings could be downgraded if negative credit conditions in Armenia lead to an erosion of the banks’ solvency metrics, i.e. meaningful weakening in asset quality and/or in the capital generation capacity of the banks.
VTB Bank (Armenia) is entirely owned by Russian VTB Bank. In late 2015 its assets stood at 315.8 billion drams; its liabilities were worth 269.8 billion drams and its capital – 46 billion drams.
Ardshinbank’s assets in late 2015 were worth 401.7 billion drams; its liabilities- 351.7 billion drams and its capital- 50 billion drams. ($1 – 480.84 drams). -0-
