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Research Update: Belagroprombank Foreign-Currency Ratings Affirmed At 'CC/C', Removed From CreditWatch Negative; Outlook Negative

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Research Update: Belagroprombank Foreign-Currency Ratings Affirmed At 'CC/C', Removed From CreditWatch Negative; Outlook Negative

Overview

  • On Aug. 3, 2022, S&P Global Ratings lowered its long-term foreign currency rating on Belarus to 'SD' (selective default), following the government's inability to fulfill one of its coupon payments.
  • We expect Belagroprombank will continue to service its debt.
  • Therefore, we removed from CreditWatch negative our foreign currency long-term rating on the bank and affirmed it at 'CC', in line with the transfer and convertibility (T&C) assessment on Belarus. At the same time, we removed from CreditWatch negative our foreign currency short-term rating on the bank and affirmed it at 'C'.
  • We also affirmed our local-currency ratings at 'CCC/C', since we consider Belarusian-ruble (BYN)-denominated bank debt to be less vulnerable to nonpayment.
  • The negative outlook indicates that macroeconomic and fiscal stress may weaken Belagroprombank's ability to stay current on its obligations.

Rating Action

On Aug. 5, 2022, S&P Global Ratings removed its foreign currency long-term and short-term issuer credit ratings on Belagroprombank from CreditWatch with negative implications, where it was placed on March 1, 2022. At the same time, we affirmed our 'CC/C' foreign currency and 'CCC/C' local currency long- and short-term ratings on the bank. The outlook on both the local currency and foreign currency long-term ratings is negative.

Rationale

Despite our downgrade of Belarus to 'SD' and risks of further tightening of capital controls, Belagroprombank remains current on its financial obligations. We lowered the foreign currency rating on Belarus to 'SD' because the Belarusian government did not make the coupon payment of some $23 million on its U.S.-dollar-denominated 2027 Eurobond in dollars by the end of the contractual grace period. We believe macroeconomic and fiscal stress may weaken Belagroprombank's ability to stay current on its local-currency financial obligations. We consider Belagroprombank's financial performance to be closely tied to that of the sovereign because it has relied on government support in the past. We therefore cap our ratings on the bank at the level of the sovereign credit rating on Belarus. Belagroprombank is significantly exposed to economic risks in Belarus and has business, funding, and strategic links to the sovereign.

We understand the bank has not experienced any difficulties in servicing its financial obligations thus far. The bank has 15 outstanding local-currency-denominated bonds totaling BYN1.7 billion (about $670 million), most of which mature after 2025. Belagroprombank does not have any foreign-currency-denominated debt.

In April 2022, the bank's sole shareholder Belarus increased its capital by BYN640 million ($250 million), which is about one-third of its total capital. We note that Belagroprombank's deposit base has been relatively stable since the beginning of 2022. The bank maintains funding and liquidity ratios well above minimum requirements, with liquidity coverage ratio indicators above 250% and net stable funding ratio indicators above 120% as of July 1, 2022. Belagroprombank's liquid assets--including unrestricted cash, interbank placements, and the securities portfolio--accounted for about BYN3.9 billion, or 24% of total assets at the same date.

Outlook

The negative outlook indicates that macroeconomic and fiscal stress may weaken Belagroprombank's ability to stay current on its obligations.

Downside scenario

We would lower the ratings on Belagroprombank if we see indications that the bank's obligations could suffer nonpayment or restructuring, or if we observe significant deposit outflows.

Upside scenario

Any positive rating action on Belagroprombank would require a positive rating action on the sovereign, including an improvement of our T&C assessment.

ESG credit indicators: E-2, S-1, G-4

Related Criteria

Related Research

Ratings List

Ratings Affirmed

Belagroprombank JSC

Issuer Credit Rating
Local Currency CCC/Negative/C
Ratings Affirmed; CreditWatch/Outlook Action
To From

Belagroprombank JSC

Issuer Credit Rating
Foreign Currency CC/Negative/C CC/Watch Neg/C

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

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