On April 11, Fitch downgraded long-term issuer default ratings of CenterCredit to "B" and affirmed that of ATF at "B-" with a "Stable" outlook on both issuers.
The downgrade of BCC' rating reflects the significant deterioration of the bank's asset quality as the share of NPLs doubled over 2013 from 9.7% to 19.4%, which was driven by:
- a recognition of T34bn of previously written-off fully-provisioned loans due to regulatory requirements,
- T24bn of restructured loans becoming non-performing,
- T40bn of performing loans turning overdue.
The combined share of non-performing and restructured loans increased in 2013 to 28% from 21% a year ago. Moreover, the agency highlighted that the reported restructured loans do not include the "loans rescheduled without a reduction of 10% or more in the net present value of the exposure" and, therefore, understate the real amount. For instance, seven out of 20 largest credit exposures (9% of gross loans) were restructured without being recognized as restructured.
Fitch stated that during the bank run in February BCC incurred a T110bn outflow of deposits which was partly offset by a T80bn financing from the National Bank.
According to Fitch, ATF Bank's ratings remain constrained by poor asset quality, weak capital and profitability, but also are supported by sufficient liquidity, stable funding and "some limited progress" with recovering of bad loans. After the ownership change, ATF's the share of NPLs declined to 44% as of end-2013 from 51% in 1H2013 with restructured loans accounting for another 15% of gross loans. The bank management expected to recover additional T60bn of NPLs or 7% of gross loans during 2014. Still, the bank is unlikely to recover any significant provisions given a low provision coverage of the combined share of non-performing and restructured loans at 58%.
The agency also highlighted that ATF's bottom line broke even for the first time in five years thanks to a one-off T4.4bn tax benefit and that the bank's cash-adjusted net interest income was insignificant in 2013. Fitch views ATF's liquidity position as 'comfortable'. After a repayment of $311mln of Eurobonds and T11bn of local bonds in 1Q2014, ATF's liquidity covered 20% of deposits against 32.8% as of end-2013.