Further ratings downgrades and sanctions

Following the downgrade of Russia’s credit rating, Fitch downgraded ratings of 32 Russian banks and their foreign subsidiaries. Majority of banks ratings were downgraded to B and put on Ratings Watch Negative list. Fitch states that sanctions negatively affect banks’ ability to pay out their debt obligations in foreign currency. Agency notes, that in the medium term sanctions effect might lead to weaker lender’s financial profiles.  The list of downgraded banks include Raiffeisen, Gazprombank, Sberbanks and Tinkoff Bank.

Similar downgrade occurred for other sectors of Russian economy. Majority of companies were downgraded to B rating following the severe shock on the operating environment, Russia’s credit rating downgrade and reduced financial flexibility. The list includes:

  • 26 natural resource companies, including Gazprom (B from BBB), Gazprom Neft (B from BBB), Tatneft (B from BBB-), Novatek (B from BBB) and Lukoil (B from BBB+)
  • 11 utility companies, including Rosseti (B from BB+) and Inter Rao (B from BBB)
  • 8 transport and infrastructure companies, including Aeroflot (B- from BB) and Globaltrans (B from BBB-)
  • 5 consumer & healthcare companies, including X5 Retails (B from BB+).

Since the last update on the sanctions arena there were following developments. Singapore and Switzerland joined the EU and the US sanctions against the Russian Central Bank, financial system and exports of defense related goods to Russia:

  • Singapore banned transactions and froze assets of VTB, VEB, Promsvyazbank, Rossiya
  • Singapore banned concluding transactions with the Russian government, the Central Bank and the legal entities they own
  • Both Singapore and Switzerland banned exports of dual-use items, defense and security sector goods to Russia
  • Switzerland joined EU sanctions, including wide-ranging restrictions on financial activities, such as cutting seven Russian banks from the SWIFT and ban of transactions with the CBR. Government funding or financial assistance for trading or investing in Russia is prohibited
  • The Swiss government also confirmed it is freezing the assets of people and companies with connections to Vladimir Putin.

 

Authors: Egor Kiselev, Head of International Business & Investment Marketing, Marina Tsutskiridze, Investment Specialist, Aleksandra Kuznetsova, Investment Specialist

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