Outlook on Russian Bank IBSP to positive

Standard & Poor’s Ratings Services said that it revised its outlook on Russia-based International Bank of Saint-Petersburg (IBSP) to positive from stable. At the same time, the ‘CCC+/C’ long- and short-term counterparty credit and ‘ruBB’ Russia national scale ratings were affirmed.

“The outlook revision reflects macroeconomic improvements in Russia, which are reducing risks for domestic banks, including IBSP,” said Standard & Poor’s credit analyst Ekaterina Trofimova.

Also factored in is the bank’s strengthening risk management function, which should improve risk control, constrain risk appetite, and enhance the risk-reward balance.

(For our view on the Russian banking system, see “Banking Industry Country Risk Assessment On Russia Raised To Group 8 From Group 9,” published June 4, 2007, on RatingsDirect, the real-time Web-based source for Standard & Poor’s credit ratings, research, and risk analysis.)

The ratings continue to reflect ISBP’s low capitalization, still-limited customer base, and high lending and funding concentrations. The bank’s good regional name recognition, reduced risk appetite in securities and foreign currency trading, and sustained financial and commercial performances partially mitigate these weaknesses.

With total assets of Russian ruble (RUR) 26.5 billion (about $1 billion) at Dec. 31, 2006, IBSP ranks among the top 70 Russian banks.

“The positive outlook reflects improving prospects for an upgrade, supported by diminishing macroeconomic and industry risks, along with the bank’s strengthening risk management framework and core revenue generation, as well as sustained commercial performance,” said Ms. Trofimova.

With substantial progress in these areas, the ratings may be raised even if our concerns on concentration risks and capitalization remain significant. The outlook or the ratings could be revised downward if IBSP’s capitalization comes under further pressure or the bank’s financial profile deteriorates materially.