Bank Loses Investment Grade

Gazprombank, the country's third-largest bank, saw its credit rating lowered to "junk" status by Standard & Poor's on Tuesday.

The ratings service lowered the bank's long-term and short-term counterparty credit ratings to BB+/B from BB-/A-3, with a negative outlook, citing fallen earnings and a poor economy.

"The rating action reflects the bank's weakened stand-alone credit profile, including sharply pressured capitalization, decimated earnings caused by recent sizable market-sensitive losses and the slowdown in the Russian economy," Standard & Poor's credit analyst Yekaterina Trofimova said in a statement.

The bank's increasing level of risk because of participation in a state-sponsored bailout program aimed at supporting the domestic banking sector also contributed to the downgrade, she added.

Gazprombank is 42 percent owned by Gazprom and is the main provider of financial services to the gas giant.

The downgrade came as Mechel said Tuesday that it would borrow $255 million from Gazprombank in order to build a mill for steel rail production at its Chelyabinsk facility.

Last month, the Russian coking coal and steel producer pledged 25 percent minus one share of the entire Chelyabinsk Iron & Steel Works as collateral for a credit facility of up to $85 million from Gazprombank.

(MT, Reuters)