Fitch changes forecast of 5 Belarusian banks to “negative”

Fitch Ratings changed the forecast for five Belarusian banks from "stable" to "negative", while affirming the long-term issuer default rating (IDR) at "B", the agency's press service reported.

We are talking about Belarusbank, Belinvestbank, JSC Bank of Development of the Republic of Belarus, BPS-Sberbank and BelVEB bank.

The rating action reflects a similar rating action for Belarus's sovereign long-term IDRs, the agency explained.

"The sovereign rating action reflects Fitch's opinion that the intensification of political unrest in Belarus after the recent elections may lead to additional pressure on international reserves and outflow of deposits, increasing risks to macroeconomic and financial stability," the message says.

The agency notes that Belarusbank and Belinvestbank experienced deposit volatility during market unstability in Q2 and Q3, although the associated impact on their deposit base and liquidity profile was contained. This is due to the systemic status of banks and state property, as well as a significant share of irrevocable deposits (about 35-40% of customer funds).

Domestic foreign currency deposits of Belarusbank, Belinvestbank and the Development Bank (in aggregate USD 5.7 billion at the end of October 2020), significant foreign exchange non-deposit liabilities (including short-term USD 1.4 billion) and their own limited highly liquid assets in foreign currency (USD 0,6 billion) may also make it difficult for the government to support them, especially in a scenario of deep stress, analysts at Fitch say.

As for BPS-Sberbank and BelVEB bank, according to Fitch experts, despite the strong ability and inclination of parent banks to support subsidiaries, the negative forecast reflects the potentially weaker financial position of the sovereign state, which may lead to an increase in Belarusian transfer risk and convertibility risk and therefore limit the extent to which support can be used for servicing banks' own liabilities.

"An increase in the IDR for Belarusian banks in the near future is unlikely, given the negative forecast for the sovereign rating of Belarus," the message summarizes.

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