UralTransBank’s margin threatened by fewer loans, Fitch Ratings says
The international rating agency affirmed UralTransBank’s B- long-term Issuer Default Rating with Stable outlook.
The rating affirmation means the agency has taken into account the recent improvements on the market; still, Fitch Ratings feels the bank should be worried about the poor quality of its assets.
‘According to its reports, UralTransBank’s bad debt came to 20.8% of the total lending portfolio at the end of the fist quarter, whereas 21% of the portfolio underwent restructuring. Also, the bank keeps negotiating with the problem borrowers. At the same time, UralTransBank’s shrinking lending portfolio (whose volume dropped by 20% in 2009 and by another 3% in the first quarter of 2010) has been affecting the bank’s margin greatly. On the other hand, this negative influence was compensated by the bank’s great ability to absorb losses. Fitch believes the company would be able to set aside up to 31% of its lending portfolio before the capital adequacy figures declined below the required minimum,’ the agency reports.
‘In fact, the bank’s ratings could be improved in case UralTransBank solves its asset quality problems and makes sure its profit flows are restored. However, in case its lending portfolio keeps losing its value, the rating might get worse,’ Fitch Ratings’ analysts say.
The rating affirmation means the agency has taken into account the recent improvements on the market; still, Fitch Ratings feels the bank should be worried about the poor quality of its assets.
‘According to its reports, UralTransBank’s bad debt came to 20.8% of the total lending portfolio at the end of the fist quarter, whereas 21% of the portfolio underwent restructuring. Also, the bank keeps negotiating with the problem borrowers. At the same time, UralTransBank’s shrinking lending portfolio (whose volume dropped by 20% in 2009 and by another 3% in the first quarter of 2010) has been affecting the bank’s margin greatly. On the other hand, this negative influence was compensated by the bank’s great ability to absorb losses. Fitch believes the company would be able to set aside up to 31% of its lending portfolio before the capital adequacy figures declined below the required minimum,’ the agency reports.
‘In fact, the bank’s ratings could be improved in case UralTransBank solves its asset quality problems and makes sure its profit flows are restored. However, in case its lending portfolio keeps losing its value, the rating might get worse,’ Fitch Ratings’ analysts say.
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