Page 83 - bne IntelliNews Country Report: Russia Dec17

8.4.1 International ratings - specific details of rating actions corp/regional etc
International rating agency Standard & Poor’s Global Ratings (S&P) has cut long-term issuer default ratings in local and foreign currencies of Russia’s Promsvyazbank to B+ from BB- and put them on revision with a possibility of a further downgrade, the agency said in a statement late on November 3. Dmitry Ananyev, chairman of Promsvyazbank’s management board, said in a statement that the decision was understandable, but made without taking into account long-term prospects of Promsvyazbank. “Risks have grown significantly in the private sector of the banking system. We have to make drastic steps to reload and improve stability of the bank. These changes are conditioned not just by our wish to adapt fast to a new situation, but also by our vision of the group’s development for several years to come,” he said. The quality of the bank’s operating profit is good, as the share of no-risk commission income in the combined operating income of the bank amounts to 37%. Commission incomes cover up to 84% of operating expenses, one of the highest figure on the Russian market, he said.
8.5 Fixed income
The share Russian treasury bonds held by foreign investors reached an all-time high at the beginning of last month, central bank data showed on November 18. Foreigners’ share in ruble-denominated OFZ bonds climbed to 33.2% as of October 1 from 31.6% on September 1, the data showed. Foreign investors increased their holdings of Russia sovereign Eurobonds to $14.562bn as of October 1, which accounts for 36.6% of all the Russian Eurobonds. As of July 1, foreigners’ share in Russian Eurobonds was at 31.7%.
Russian companies are turning to the domestic bond market to raise money thanks to the fall in the rates of the Central Bank of Russia (CBR). In October, a total of RUB280bn ($4.8bn) of bonds was placed by Russian companies, a 250% increase year-on-year. The increase was mostly triggered by easing of the CBR's monetary policy and bringing issuers' ratings in line with the regulator's new requirements. Both Russian and foreign buyers have been attracted by high yields against declining inflation and the CBR's plans to cut the key interest rate even further. In late October, t he regulator cut the key interest rate by 25bp to 8.25%. Recent changes in regulations for the Russian bond market also made it more attractive. Meanwhile, as ruble-nominated bonds have been attractive, Eurobonds have been experiencing an opposite trend. In October, there were only two Eurobond placements by Russian companies for a total of $426mn, compared with seven placements for a total of a total of $2bn in September and six placements for a total of $3.2bn in October 2016. Apparently, the Eurobond segment is oversaturated as it doubled in January-October to $18.5bn, year-on-year. Still, there are no signs of saturation of decline in the ruble-nominated bond segment, as another cut in the key interest rate would make domestic bonds even more attractive. Incidentally, across the entire Commonwealth of Independent States (CIS), t he bond markets have been flourishing as companies eschew traditional banking loans and instead issue bonds to tap the pool of liquidity, betting on falling interest rates and inflation.
83 RUSSIA Country Report December 2017 www.intellinews.com