Bail-out a potential boost
for Otkritie bank's rating: S&P global
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[August 31, 2017]
By Marc Jones
LONDON (Reuters) - Russia's pledges of
support for bailed-out Otkritie could help the troubled bank's credit
rating, S&P Global said on Thursday, though the situation will only be
clear once the full details of the plan are made clear.
S&P rates Otkritie at the sub-investment grade B+ level and has had it
on a downgrade warning since late last year on concern about a drain on
deposits and takeovers of rival institutions.
This week's bailout will see the Russian central bank take up to a 75
percent stake in what is the country's biggest private lender and in the
top eight overall in terms of assets.
"Compared to the issue of the bank facing a liquidity crisis and a large
outflow of funds, the government saying it will support the bank and
ensure payments are made, this is clearly something that is improving
the situation," said S&P Russian banks analyst Natalia Yalovskaya.
![](http://archives.lincolndailynews.com/2017/Aug/31/images/ads/current/xamis_sda_FAIR_2017.png)
On whether it could be enough to stabilize or even lift the bank's
rating, she said some of the key details about the lender's rescue are
still to be clarified.
"We need to understand the strategy of the central bank towards the bank
and its future," Yalovskaya added. "Whether it will continue the same
activity, whether it will change things, whether the shareholder
structure should change, these are all important unknowns."
For the time being there is also uncertainty about the terms of
Otkritie's rescue itself.
Authorities said on Tuesday when it was announced that there were no
plans for the bank's creditors to share the cost of the plan -- a
'bail-in' in market parlance -- and this spurred a huge rally in the
bank's shares and dollar bonds.
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![](../images/083117pics/busine1.jpg)
A man walks past the logo of Russian bank Otkritie in Moscow, Russia
August 30, 2017. REUTERS/Sergei Karpukhin
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But its April 2019 bond tumbled all the way back to a record low on Wednesday
and its shares <OFCB.MM> dropped to their lowest since the start of 2016 on
Thursday, as fears lingered that holders of the lender's subordinated debt would
be asked to contribute to its rescue.
The move to prop up Otkritie could also have knock-on effects for other Russian
banks.
"We think the state-owned banks will be beneficiaries of the flight to quality,"
Yalovskaya said.
But "it would be unfortunate in our view if other (private) banks consider the
case of Otkritie as the evidence of too big to fail theory, which may prompt
them to assume the support of the government is there no matter how risky their
behavior is."
"That may not be the case, each case would be considered individually by the
regulator," she said.
![](http://archives.lincolndailynews.com/2017/Aug/31/images/ads/current/elkhart_grain_daily_sda_022614.png)
Otkritie is not rated by rival rating agency Fitch but its sovereign analyst
Erich Arispe said the move to rescue the bank "does not represent a risk for the
sovereign’s balance sheet."
"Russian policy makers have made progress towards improving macroeconomic
stability, enhancing the economy’s capacity to adjust to shocks and adjusting
fiscal accounts," Arispe said.
(Reporting by Marc Jones; Editing by Hugh Lawson)
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