Russia's Alfa Bank Outlook Changed To Positive
10 Jan 2002
Fitch, the international rating agency, has today changed the Outlook for Russia's Alfa Bank's (Alfa's) Long-term rating of 'B-' (B minus) to Positive from Stable. Alfa's other ratings have been affirmed at Short-term 'B', Individual 'D' and Support '5T'. Following a number of years of under-performance, Alfa's core operating profitability has been improving. The bank's consistently high cost base remains a concern, but its prospects are more positive due to higher business volumes. In addition, the increasingly universal character of Alfa's operations, which looks to ensure a presence in all the key markets and products, should help to improve further the diversification of revenue streams and to stabilise performance. Asset quality has continued to strengthen but, particularly in light of the bank's rapid growth during the past two years, it is essential that adequate reserves for loan losses be maintained. Alfa's ratings also take into account the professionalism of its management team. However, Fitch comments that Alfa's capitalisation has been low for the volatile operating environment and needs to improve further. To this end, the bank's improving profitability is helping, but given its plans for further business growth and the need to ensure an adequate level of loan loss reserves, further direct capital contributions may also be necessary. A reduction in Alfa's participation in significant transactions of the wider Alfa Group Consortium (AGC) would also be a positive step. Alfa Bank was established in 1990 by the founders of AGC and is one of the five largest banks in Russia by assets. The bank comprises both commercial and investment banking operations, with an emphasis on the corporate sector, but also has a growing retail business. As such, it is one of very few private Russian banks with a genuine strategy of becoming a "universal" bank. AGC is one of Russia's largest Financial Industrial Groups, which, in addition to finance, includes companies in oil extraction and refining (notably Tyumen Oil Company); commodities trading (oil, oil products, metals, sugar etc); telecommunications and media; retail and food processing
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