S&P lowers MDM Bank

S&P said it lowered the long-term counterparty credit rating on MDM Bank to B- from B and lowered its short-term counterparty credit rating to C from B.

The agency also said it also lowered the bank’s Russia national scale rating to ruBBB from ruBBB+.

The outlook is stable.

The capitalization of MDM Bank, measured using the risk-adjusted capital ratio before diversification, deteriorated in 2015 to 2.3% from 5% as of year-end 2014, S&P explained.

The decline was predominantly caused by the substantial credit costs charged in 2015, the agency said.

But, S&P said it anticipates that the new bank created through the merger of MDM Bank and B&N Bank will see its risk-adjusted capital ratio increase to about 4.5% to 5% by the end of 2017 following a planned RUB 10 billion share capital increase and RUB 3.5 billion of perpetual subordinated debt from the owners.

Therefore, the ratings factor in an expectation that the merger with B&N Bank will go ahead as planned and without serious negative implications for asset quality and capital, S&P said.

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