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S&P downgrades Vozrozhdenie Bank on potential spillover effects from sister bank

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S&P downgrades Vozrozhdenie Bank on potential spillover effects from sister bank

S&P Global Ratings on Dec. 19 downgraded Vozrozhdenie Bank's long-term counterparty credit rating to B from B+.

The rating remains on CreditWatch negative, where S&P placed it Nov. 3, reflecting liquidity risks and pressure on parent group PromSvyazCapital's capital and risk position, the agency said. In addition, S&P affirmed Vozrozhdenie's B short-term rating.

The downgrade of Vozrozhdenie reflects S&P's expectation that the lender could face negative spillover effects from the regulatory intervention at sister bank PAO Promsvyazbank, which had been placed under the temporary administration of the Central Bank of Russia to improve its financial stability, S&P said, adding that such contagion risks could result in client-fund outflows and liquidity pressure for Vozrozhdenie.

Although S&P estimates that Vozrozhdenie's total client funds have remained stable, its corporate deposits have declined by roughly 5.6 billion Russian rubles, or 9.3% of total funding from corporate clients, the agency noted.

Also, since Vozrozhdenie is not a systemically important financial institution, S&P does not expect the central bank to provide it with financial support to prevent a solvency or liquidity crisis as it did for Promsvyazbank. The agency added that it thinks the ability of the Ananiev brothers — Vozrozhdenie's majority shareholders — to support the bank could be limited.

As of Dec. 19, US$1 was equivalent to 58.82 Russian rubles.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.