Forecast of the long-term Issuer Default Ratings (IDRs) of seven banks in Belarus fell from "stable" to "negative," affecting Belagroprombank, Belarusbank, Belgazprobbank, Belinvestbank, Belvnesheconombank, BPS-Bank and VTB Bank (Belarus). This is stated in a press release of the International rating agency Fitch Ratings. In this case, the very rating remained at "B" level.
According to Fitch, the financial position of the sovereign issuer substantially weakened in the fourth quarter of 2010 and early 2011 and is likely to worsen in the short term. The agency is worried about the situation with external finance in Belarus, as well as the sovereign issuer’s increasing dependence on the Belarusian commercial banks as sources of foreign currency.
Fitch experts note that the total state currency reserves of Belarus declined by 16% to $5 billion in the last quarter of 2010 and by additional 20% to $4 billion in January-February 2011. However, the net position has weakened considerably faster due to the fact that the National Bank increased its foreign currency borrowings from Belarusian commercial banks in the country for the fourth quarter of 2010 from $1.3 billion to $3.4 billion. What is more, the main bank of the country had a significant off-balance foreign currency liabilities to commercial banks in connection with forward contracts and swap agreements at the end of last year. Large loans from commercial banks in Belarus and from abroad led to a large increase in current account deficit, equal, according to IMF estimates, to 16% of GDP in 2010.
Long-term IDRs of Belagroprombank, Belarusbank and Belinvestbank are due to their ability to support the Belarusian authorities. The «negative» forecast shows the potential for further weakening of the sovereign’s financial position, which may reduce the state’s ability to support banks. Meanwhile, long-term IDRs of Belgazprobbank, Belvnesheconombank, BPS-Bank and VTB Bank (Belarus) reflect the possibility of using their foreign shareholders. The «negative» forecast is caused by possible further weakening of Belarus’s financial position, which, in turn, may cause an increase in transfer and convertibility risks and thus reduce the ability of banks to obtain foreign support for the maintenance obligations.
Also Fitch believes that the Belarusian banks cannot maintain the existing growth rates and their asset quality will deteriorate due to the slowdown in lending. However, «D / E» individual ratings of the Belarusian banks are based on the possibility of deterioration in asset quality and a number of more general weaknesses in the operating environment, coupled with a high proportion of state ownership in the economy and increasing macroeconomic imbalances. According to the agency, of seven banks, Belgazprobbank and Belvnesheconombank have the most powerful ability to absorb losses because their capital ratios and moderate credit under the state programs are higher.
