OREANDA-NEWS. Fitch Ratings has placed Sviaz-Bank's (SB) and Globexbank's (GB) respective Long-term Issuer Default Ratings of 'BB' and 'BB- 'on Rating Watch Negative (RWN). A full list of rating actions is available at the end of this commentary.

KEY RATING DRIVERS
IDRS, NATIONAL RATINGS, SUPPORT RATINGS AND SENIOR DEBT
The RWN reflects the risk that support for the banks will become less certain if they are sold by their current owner, Vnesheconombank (VEB, BBB-/Negative), to the state-owned Deposit Insurance Agency (DIA). Vladimir Dmitriev, the CEO of VEB, recently stated that the two banks may be sold to the DIA in the near-term as part of VEB's recapitalisation process.

The DIA already owns Rossiyskiy Capital Bank (Roscap, BB-/Negative), which is currently under a financial rehabilitation programme scheduled to last until 2025. The DIA's holding of RosCap is in line with the agency's policy role to oversee the rescue of failed banks. This, and the long-term nature of the rehabilitation programme, is a positive factor in our assessment of support for RosCap from the DIA. However, the DIA's propensity to support SB and GB and to remain a shareholder of the banks over the long term is more uncertain.

However, we believe SB and GB will continue to be supported by VEB until their transfer to DIA given (i) their current full ownership by VEB, (ii) the solid track record of support to date (including the recently announced RUB10bn of new equity in GB and the conversion in 2014 of RUB10bn subordinated debt to equity for SB), and (iii) potential reputational risks for VEB in case of a default at GB or SB.

The banks' Viability Ratings (VRs) are unaffected by this rating action.

RATING SENSITIVITIES
IDRS, NATIONAL RATINGS, SUPPORT RATINGS AND SENIOR DEBT
Fitch expects to resolve the RWNs once the banks are transferred to DIA (if such a sale takes place) and there is more clarity about their ownership structure, the DIA's strategy towards the banks and any possible future sale of them, and therefore the agency's ability and propensity to support SB and GB.

SB would likely be downgraded by at least one notch to 'BB-' (the same level as RosCap) upon being sold to the DIA. Both SB and GB could be downgraded to below 'BB-' and potentially to the level of their VRs (SB 'b'; GB 'b-'), if Fitch takes the view that support for the banks has become significantly more uncertain, e.g. because the DIA may sell them in the near- to medium-term.

However, if Fitch takes the view that the DIA's propensity to support SB and GB is similar to that for Roscap, for example, due to potential plans to merge the three banks with the DIA remaining a long-term shareholder, then the ratings may settle at the 'BB-' level. The banks' ratings may be affirmed at their current levels if VEB maintains its current ownership and affirms its intention to remain a shareholder of the banks over the long term.

The rating actions are as follows:

Sviaz-Bank
Long-term foreign and local currency IDRs: 'BB' placed on RWN
Short-term foreign currency IDR: affirmed at 'B'
Viability Rating: 'b' unaffected
Support Rating: '3' placed on RWN
National Long-term rating: 'AA-(rus)' placed on RWN
Senior unsecured debt: 'BB' placed on RWN
Senior unsecured debt National rating: 'AA-(rus)' placed on RWN

GLOBEXBANK
Long-term foreign and local currency IDRs: 'BB-' placed on RWN
Short-term foreign currency IDR: affirmed at 'B'
Support Rating: '3' placed on RWN
Viability Rating: 'b-' unaffected
National Long-term rating: 'A+(rus)' placed on RWN
Senior unsecured debt: 'BB-' placed on RWN
Senior unsecured debt: National rating: 'A+(rus)' placed on RWN
Senior unsecured debt: Short-Term rating: affirmed at 'B'