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Fitch Ratings Upgrades MDM Bank to BB


Fitch Ratings on May 27 upgraded MDM Bank's long-term foreign and local currency Issuer Default Rating to 'BB' from 'BB-'. At the same time, the ratings agency upgraded the Bank’s National Scale Long-Term Rating to 'AA-(rus)' from 'A+ (rus)'. The upgrades resolved the Rating Watch Positive on the Bank’s ratings. Fitch has assigned a Stable Outlook to the new ratings.

The rating actions reflect MDM Bank’s ability to access liquidity, the fact it was able to survive the major asset quality stress posed by the crisis without requiring emergency capital support, and the Bank’s currently substantial loss absorption capacity.

On the upgrades, Fitch said: "MDM's strong capitalization meant that the bank could have absorbed 29% credit losses at end-Q110 before its regulatory capital would have fallen to the minimum allowed 10%. In addition, MDM's shareholders have stated their readiness to inject USD500m, if needed, to maintain the regulatory capital adequacy ratio at 12%. In Fitch's view, MDM's liquidity is ample, with cash and unpledged liquid securities accounting for approximately 16% of assets at end-Q110, and managed conservatively. MDM has strong corporate governance for a Russian bank and low related party lending, which are also credit positive."

MDM Bank CFO Vadim Sorokin added, “MDM Bank has always maintained conservatively high levels of tier one equity capital and liquid assets. We are pleased with Fitch Rating’s decision to upgrade MDM Bank’s ratings, as this is a sign that our cautious approach to capital and liquidity management has successfully brought us through the worst of the financial crisis. It is also a signal that the risks associated with our merger with URSA Bank last year are behind us. We believe that the new strategy adopted by MDM Bank will create an even stronger and more secure bank as we progress our business further.”

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