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Research Update: Kazakhstan-Based SB Alfa-Bank Rating Lowered To 'B' And Kept On CreditWatch Negative Following Rating Action On Parent

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Research Update: Kazakhstan-Based SB Alfa-Bank Rating Lowered To 'B' And Kept On CreditWatch Negative Following Rating Action On Parent

Overview

  • On March 7, 2022, S&P Global Ratings lowered its long- and short-term issuer credit ratings on Russia-based Alfa-Bank JSC and holding company, ABH Financial Ltd., to 'CCC-/C' following a similar action on Russia.
  • We are lowering our global scale ratings on Alfa-Bank JSC's Kazakhstan-based subsidiary, SB Alfa-Bank JSC (ABK), to 'B/B' due to the increased credit pressure on its parent.
  • We delinked the ratings on ABK from those on Alfa-Bank JSC because we think the credit stress on the parent has had a less material impact on ABK.
  • The ratings on ABK remain on CreditWatch with negative implications, indicating that we could lower them further.

Rating Action

On March 18, 2022, S&P Global Ratings lowered its long-term issuer credit rating on ABK to 'B' from 'BB'. At the same time, we affirmed the short-term issuer credit rating at 'B'.

In addition, we lowered our national scale rating to 'kzBB+' from 'kzA+'.

The ratings remain on CreditWatch with negative implications.

Rationale

We expect the deterioration in Alfa Banking Group's overall creditworthiness will affect ABK. ABK is the Kazakhstan-based subsidiary of Alfa Banking Group, which provides banking services predominantly in Russia, Kazakhstan, and Ukraine. Luxembourg-based holding company ABH Holdings S.A. is ABK's ultimate parent. Following our recent rating action on Russia (see "Russia Ratings Lowered To 'CCC-' And Kept On CreditWatch Negative On Increasing Risk Of Default," published on March 3, 2022), we lowered our ratings on Russia-based Alfa-Bank JSC to 'CCC-/C' from 'BB+/B' and our long-term ratings on its holding company, ABH Financial Ltd., to 'CCC-/C' from 'BB-/B'. We expect pressure on the group's creditworthiness, which is mostly spurred by Alfa-Bank JSC (85% of total group assets), will adversely affect ABK.

We think ABK has a somewhat lower default likelihood than Alfa-Bank JSC. Our 'B' long-term global scale rating on ABK stands four notches above that on Alfa-Bank JSC. We have delinked the ratings on ABK from those on Alfa-Bank JSC because we think the credit stress on the parent has had a less material impact on ABK. We note that ABK's funding and operations are independent of the parentand it maintains adequate liquidity. In addition, we expect the Kazakhstan regulatory authorities would take action where necessary to protect ABK's credit profile.

CreditWatch

The ratings remain on CreditWatch negative to indicate that we could lower them further. We expect to resolve the CreditWatch placement once we have more clarity on geopolitical and economic risks in Russia and their implications for ABK's liquidity and business stability.

Related Criteria

Related Research

Ratings List

Downgraded
To From

SB Alfa-Bank JSC

Issuer Credit Rating
Kazakhstan National Scale kzBB+/Watch Neg/-- kzA+/Watch Neg/--
Downgraded; Ratings Affirmed
To From

SB Alfa-Bank JSC

Issuer Credit Rating B/Watch Neg/B BB/Watch Neg/B

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352 Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; or Stockholm (46) 8-440-5914

Analytical Group Contact:Financial Institutions EMEA;
Financial_Institutions_EMEA_Mailbox@spglobal.com

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