Standard & Poor’s Ratings Services has revised its outlook on Russia-based OJSC Commercial Bank Petrocommerce (PK) to positive from stable. At the same time, Standard & Poor’s affirmed its ‘B-‘ long-term and ‘C’ short-term counterparty credit ratings, and its ‘ruBBB+’ Russian national scale rating on PK.
In addition, Standard & Poor’s assigned its ‘B-‘ international scale and ‘ruBBB+’ Russian national scale ratings to the bank’s planned Rb1bn (US$31.85mn) three-year senior unsecured bond issue.
“The change in outlook reflects PK’s close commercial and financial relationship with its majority owner, LUKoil OAO (BB-/Stable/–), and the bank’s good business prospects, which are underpinned by an expanding client base outside the LUKoil Group and better prospects for macroeconomic stability in the Russian Federation,” says Standard & Poor’s credit analyst Ekaterina Trofimova.
The ratings on PK reflect the bank’s membership in the LUKoil group. PK operates as a settlement bank for LUKoil, and a significant part of its business comes from LUKoil and its affiliates. While PK is relatively small within the LUKoil group as a whole, the bank provides valued services to the group’s companies and their employees. In 2001, LUKoil subscribed to PK’s US$115mn capital increase. This increase, large by Russian standards, demonstrates LUKoil’s interest in expanding the bank’s activity. PK’s credit profile is also enhanced by its good capital with respect to risk assets and its adequate liquidity position. These positive factors are offset by the bank’s relatively weak earnings profile, large single-party concentrations, notably to LUKoil companies, and the significant risks that still remain in the Russian banking environment.
“Thanks to its privileged role within the LUKoil group, PK has the potential to expand its business and to improve its financial profile in the growing, but unpredictable, Russian banking market,” adds Trofimova. “The rating on PK will depend on the development of the LUKoil group, further improvements in the operating environment for Russian banks, and PK’s success in diversifying its client base.”