Fitch keeps Industry & Construction on positive watch

Fitch Ratings said it kept Industry & Construction Bank's B+ long-term and 4 support ratings on Rating Watch positive and affirmed the company's B short-term and D individual ratings.

Fitch is keeping the long-term rating on Rating Watch positive to reflect the option of state-owned Vneshtorgbank (BBB) to increase its total stake to 76%, which is likely to be exercised in the near future. Fitch said the exercise of the option would further increase the probability of support in the event of need and could lead to a significant upgrade in Industry & Construction's ratings.

The affirmed rating reflect Industry & Construction's improved profitability, stronger total capital position following a recent $400 million subordinated debt issue, strong regional franchise in northwestern Russia and expansion of operations outside its home region, which should enable it to further diversify its customer base and revenues.

However, Fitch said the ratings also takes into account the bank's still low core capitalization, significant appetite for market risk, considerable loan book concentrations and still relatively high exposure to related parties.

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