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Standard & Poor’s Ratings Services has raised its long-term counterparty credit rating on Russia-based bank Surgutneftegazbank (SNGB) to ‘CCC+’ from ‘CCC’. At the same time, Standard & Poor’s affirmed its ‘C’ short-term counterparty credit rating on SNGB. The outlook is stable.

“The upgrade is based on the continuing close relationship between the bank and its parent, Surgutneftegaz (SNG; not rated), one of the five largest vertically integrated oil companies in Russia, which continues to direct significant cash settlement business volumes and deposit flows through the bank,” says Standard & Poor’s credit analyst Irina Penkina.
The ratings also reflect SNGB’s good liquidity and satisfactory asset quality compared with its Russian peers. Constraining factors include weak profitability, a relatively high concentration in lending exposures and liabilities, and low capitalisation. “In addition, although the macroeconomic prospects in

  • Russia have improved lately, the banking sector is still subject to high operating risks,” says Penkina.

    The direction of the ratings on SNGB will depend on the continuance of the bank’s close relationship with SNG, particularly in respect of providing capital to support SNGB’s independent commercial banking activities. Although SNGB considers these activities to be a means to improving profitability, they will raise the risk profile of SNGB, and in particular subject the bank to higher asset quality risks in the future.