Moody’s downgrades Prominvestbank Ukraine, long-term deposit ratings on review

Moody's Investors Service has downgraded the bank financial strength rating (BFSR) of Prominvestbank to E from E+, its long-term local currency and foreign currency bank deposit ratings to Caa2 from Ba2 and B2, respectively, and its National Scale Rating (NSR) to B3.ua from Aa1.ua. Long-term deposit ratings have been placed on review with direction uncertain.
"The rating action is in response to the announcement that the National Bank of Ukraine (NBU) has taken control of Prominvestbank following the concerns about the bank's ability to continue its operations as a viable stand-alone entity," said Yaroslav Sovgyra, Moody's lead Analyst for Prominvestbank.
Moody's underlines that prior to taking control of Prominvestbank, the NBU has provided an extraordinary support to the bank in the form of emergency liquidity line of 5 billion Hryvnya. The Ukrainian legislation gives the NBU powers such as limiting or prohibiting the disposal of the banks' capital and assets and imposing temporary restrictions on payments to creditors. The NBU has already announced a temporary moratorium on payments to creditors over the period of six months.
In downgrading the BFSR to E from E+, Moody's explains that Prominvestbank's franchise and the overall credit profile have been significantly impaired in light of the recently experienced run on deposits by the bank.
The rating review with direction uncertain captures the present uncertainty with regard to the possible outcomes of Prominvestbank's current situation, as the NBU is currently investigating potential solutions as regards Prominvestbank. On the one hand, if the bank manages to receive additional support either from the regulatory authorities or from a financially stronger strategic partner that assumes its obligations, Moody's would be likely to upgrade Prominvestbank's deposit ratings. On the other hand, if the bank fails to attract a potential strategic partner, it likely to be liquidated, which would merit further rating downgrades.
The previous rating action on Prominvestbank was implemented on October 1, when Moody's placed Prominvestbank's ratings on review for possible downgrade due to concerns that the run on deposits currently being experienced by the bank may have a significant negative impact on its franchise, already tight liquidity position and the funding profile.
Headquartered in Kiev, Ukraine, Prominvestbank reported unaudited consolidated total assets of UAH27.5 billion (US$5.7 billion) and total equity of UAH 2.8 billion (US$577 million) according to Ukrainian Accounting Standards at 30 June 2008.