Standard & Poor’s Ratings Services has lowered its long-term counterparty credit rating on Russian bank Menatep St Petersburg (MSPb) to ‘CCC’ from ‘CCC+’, and placed the rating on CreditWatch with negative implications based on concerns over damage to MSPb’s franchise stemming from ongoing legal and tax disputes involving the bank’s management and owners.
At the same time, the ‘C’ short-term counterparty rating was placed on CreditWatch with negative implications.
The Russian tax authorities recently opened a criminal case charging MSPB’s managers with tax evasion. MSPb is part of the banking arm of the Yukos-Menatep group, and is owned by IFA Menatep.
“The allegations facing the bank’s employees, along with similar charges against other Yukos-Menatep group owners and employees, including OAO NK Yukos (BB/WatchNeg/–), have damaged the bank’s reputation and could also limit the group’s ability to support the bank if needed,” says Standard & Poor’s credit analyst Ekaterina Trofimova. In addition, Platon Lebedev, the head of IFA Menatep, and Michael Khodorkovsky, the largest shareholder of Yukos, were in custody at the time of writing.
“These negative developments could make it difficult for the bank to retain customers and personnel,” adds Trofimova.
The ratings on MSPb also reflect the bank’s large single-party lending concentrations, relatively weak, although improving, earnings profile, and small capital base.
“Due to its concentrated funding and lending portfolios, the bank is highly vulnerable to potential customer departures,” says Trofimova. “Moreover, the bank’s low operating efficiency and weak capitalisation provide it with limited capacity to withstand potential damage to its franchise.”
Resolution of the CreditWatch status will follow an examination of the extent to which the tax investigation is negatively affecting the bank’s franchise, and the impact on the bank’s funding and liquidity.