Moody's might downgrade MTS Bank

Moody's Investors Service said it placed MTS Bank’s B2 foreign-currency subordinated debt rating on review for downgrade.

The review for downgrade mirrors the recent rating action on the bank's parent, Sistema JSFC (Ba2), and reflects Moody's assessment of the risks associated with the potential weakening capacity and willingness of the parent to provide support to its subsidiary.

The agency also noted the bank’s relatively low reserve coverage of non-performing loans, which requires additional provisions; a notable deterioration of the bank's asset quality and profitability caused by the heightened risks in the bank's loan portfolio; and the bank's high dependence on regular capital injections from shareholders.

At the same time, the bank’s ratings are supported by its strengthened franchise, its ample liquidity buffer and the notable improvements in its risk profile as demonstrated by reduced single-name borrower concentration and the improved business model and transparency of 66%-owned subsidiary East West United Bank SA, Moody’s said.

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