Standard & Ratings Services has revised its outlook on Ural-Siberian Bank (OJSC) (UralSib), one of the 10 largest banks in Russia, to stable from positive, based on increased uncertainty over the bank’s ownership and future strategy. At the same time, the ‘B-‘ long-term and ‘C’ short-term counterparty credit ratings on the bank were affirmed.
Upcoming regional elections in December 2003 have heightened tension in the political and business environment in the Republic of Bashkortostan (B+/Stable/–), UralSib’s home region. The Bashkortostan tax authorities recently initiated court proceedings to reverse a share increase taken by UralSib in first-half 2003 that diluted Bashkortostan’s ownership in the bank to less than 50%. The uncertainties about ownership also reflect the recent announcement of a sale of a block of Bashkortostan’s shares to the NIKoil group (a Russia-based financial group; not rated) and the possible acquisition of this group’s retail bank NIKoil-Avtobank by UralSib.
“Future ratings will reflect the degree of stability in the political and business environment of Bashkortostan, as well as UralSib’s future strategy and any potential changes in its ownership,” says Standard & Poor’s credit analyst Ekaterina Trofimova. The possible acquisition of NIKoil-Avtobank, about one-third the size of UralSib and a bank with a troubled past, represents a potentially large change in the risk profile of UralSib.
“If the acquisition of NIKoil-Avtobank brings on poor quality assets and a damaged franchise, the ratings on URALSIB could be lowered,” adds Trofimova. “In addition, a successful reversal of the share issue of the first half of 2003 would reduce UralSib’s capital and represents a potential negative rating factor. The ratings could be raised, however, if UralSib improves the profitability of its expanded network and exploits the ample opportunities in the growing Russian financial sector.”