On October 28, S&P downgraded Bank CenterCredit's (BCC) long-term and short-term counterparty credit ratings from B+ to B. Outlook remained stable. The negative rating action was driven by the weakening business position of the bank due to a very low profitability compared to peers over the past seven years. The bank's ROA of about 0.07% over the past 3.5 years is significantly below the average ROA of rated peers of 1.3%.
The agency does not expect an increase of BCC's profitability to that of peers in the next two years as economic growth is stagnating and tenge devaluation would have a negative impact on already bank’s poor performance.
The agency forecasts a decline in the risk-adjusted capital ratio for BCC from 4.2% in 2014 to less than 4% in 2015-2016. The agency does not expect a capital injections from the shareholders in the next 18 months.
We view the news as neutral to credit quality of BCC, as the rating of the banks was already at B level from Fitch and Moody's. The bank has one outstanding subordinated perpetual Eurobonds in the amount of $80.8mn with a call option starting from March 2016.