Standard & Poor's rated Belarusbank at «B-»

Category status:
April 22, 2016 18:14

Standard & Poor’s affirmed the largest Belarusian bank Belarusbank’s credit rating at «B-» with a stable outlook. The affirmation is due to Belarusbank’s business profile and financial performance stability despite the difficult operating conditions in Belarus.

The ratings on Belarusbank are constrained by the sovereign foreign currency credit ratings on Belarus, because the bank operates exclusively within the country and remains highly exposed to sovereign-related risk.

The bank’s stand-alone credit profile (SACP), at ’b’, is, however, one notch higher than the rating on Belarus, having improved after a capital increase in late 2011. JSC Savings Bank Belarusbank’s capitalization has strengthened following a Belarusian ruble 12.9 trillion Tier 1 capital injection by the Belarus government on December 30, 2011.

The rating agency believes Belarusbank plays a \"very important\" role for, and has a \"very strong\" link with, the government, resulting in a \"very high\" likelihood of government support in the event of need.. Despite a government announcement that it will allow the privatization of a minority stake in the bank, Standard & Poor’s analysts consider it highly unlikely in current market conditions.

Similar articles

Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.

Recent trends