S&P: Agency for Housing Mortgage Lending Outlook Revised To Stable After Same Action On Russia; 'BB+/B' Ratings Affirmed
The outlook revision on AHML follows our recent similar action on the Russian Federation (see "Russian Federation Outlook Revised To Stable From Negative OnAbating External Risks; Ratings Affirmed," published Sept. 16, 2016, on RatingsDirect).
We continue to consider AHML to be a government-related entity (GRE). In accordance with our criteria for rating GREs, our view of a very high likelihood of extraordinary government support is based on our assessment of AHML's:
Very important role as Russia's sole state developer of mortgage market infrastructure, which the government views as an essential policy tool to improve currently poor housing affordability. Going forward, AHML will play an increasing role in lowering primary mortgage rates through greaterinvolvement on the secondary market. The institution will continue to drive the development of the market for residential mortgage-backed securities and promote social and rented housing; and
Very strong link with Russia, due to the state's 100% ownership of AHML and our view of a very low likelihood of privatization of AHML's core public policy related business in the medium to long term, the government's strong oversight of the company's strategy with a deputy chairman of the government heading the board, and the high reputation riskfor the government if AHML were to default. Over 60% of AHML's existing wholesale debt is secured by state guarantees, although these are conditional on potential the guarantor objections, as well as the form andtimeliness of the claim.
Our long-term rating on AHML is therefore one notch higher than our assessmentof the agency's stand-alone credit profile (SACP). We use our banking criteriato assess AHML's SACP, reflecting the agency's status as a quasi-bank and the similarities of its financial profile to those of a bank. We assess AHML's SACP at 'bb'.
The stable outlook on AHML reflects that on Russia, and the entity's SACP, which remains in line with our base-case expectations. A rating action on Russia would likely be followed by a similar action on AHML.
We could lower our rating on AMHL over the next year, if we were to lower our assessment of likelihood of extraordinary government support, or if we saw a significant deterioration in the agency's performance, leading to a downward revision of the SACP. However, we currently see these developments as unlikely.
Given our 'bb' SACP assessment for AHML and the one-notch uplift for government support we include in the long-term rating on AHML, we could take apositive rating action on AHML in the next 12 months if we were to revise our assessment of the SACP upward and raise our rating on the sovereign. Under ourcriteria for rating GREs, we would cap our local currency ratings on AHML at the level of the foreign currency sovereign rating.