Moody's Investors Service has downgraded the long-term local-currency deposit and foreign-currency senior unsecured debt ratings of Ardshinbank to Ba3 from Ba2, and downgraded Ardshinbank's and VTB Bank (Armenia)'s foreign-currency deposit ratings to B1 from Ba3. The outlook on both banks' ratings has been changed to ‘negative’ from ‘stable’.
The rating agency said these actions follow the weakening of Armenia's credit profile, as reflected in the downgrade of the government debt rating to Ba3 from Ba2 on January 15, as well as the country ceiling for foreign-currency deposits to B1 from Ba3.
While Moody's considers that the Armenian government will remain willing to assist Ardshinbank in the event of need (because of its systemic importance), the government's capacity to do so has lessened, as expressed by the downgrade of the government debt rating.
At the same time, the rating agency affirmed and changed to negative the outlook on Ardshinbank's standalone bank financial strength rating (BFSR) of D- , reflecting the outlook on the sovereign rating.
Given the bank's exposure to the deterioration in Armenia's operating environment, the bank's standalone credit profile is likely to be influenced by the pressures on its asset quality and profitability in the medium term.
Moody's also changed to negative the outlook on VTB Bank (Armenia)'s standalone BFSR of D- and its supported local-currency deposit rating of Ba2, reflecting the outlook on the sovereign rating.
The bank's standalone credit profile is likely to be influenced by the pressures on its asset quality and profitability, the rating agency said. Furthermore, the bank's stand-alone credit assessment is closely linked with VTB Bank, JSC's stand-alone credit standing (BFSR of D- on review for downgrade) as it represent an integral part of the group's franchise and business activity.
Moody’s said the negative rating outlooks imply that upward pressure on the long-term debt and deposit ratings of Ardshinbank and VTB Bank (Armenia) is unlikely in the next 12 months.
The agency said it might downgrade the ratings of Ardshinbank and VTB Bank (Armenia) further if it observes any evidence of erosion of the risk-absorption capacity and financial fundamentals of the affected entities stemming, for example, from increasing challenges within the domestic operating environment.
