Fitch: Russian bank privatization could lower support floors

Fitch Ratings said further privatization of Russia's banks could reduce the potential for state support, resulting in moderately lower support rating floors.

President Dmitry Medvedev has asked the government and the Central Bank of Russia to prepare legislative changes to reduce state control of Bank VTB and Sberbank of Russia (both BBB/stable) to below 50%. Given the growing appetite in Russia for further privatization, in Fitch's view there is now a significant probability that this will go ahead during Vladimir Putin's forthcoming six-year presidential term.

If government ownership falls below 50%, it would be moderately negative for the level of potential support the agency factors into the banks' ratings. Fitch said that combined with the broader global trend for governments to reduce their implicit support for banks, this would probably lead to a moderate reduction in the banks' BBB support rating floors.

Russian Agricultural Bank (BBB/stable) is less likely to be privatized in the medium term, in Fitch's view, because its more explicit policy role would make it harder to attract investors.

As a development bank, Vnesheconombank (BBB/stable) is not expected to be included in any privatization program, the agency noted.

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