BDK orders rating for prestige, confidence
Bank officials said that the rating was ordered to help them gain credibility on the interbank market and speed up privatization by gaining clout with the Ministry of Finance. They do not plan to issue debt instruments as a direct result of the rating.
Moody's Interbank Credit Service Ltd. assigned BDK a mediocre speculative grade Ba3/not-prime deposit rating as well as a weak financial strength rating of E+, almost the bottom of the scale.
But many analysts were in the dark as to why BDK ordered the rating. "It seems odd they would spend the $40,000 or so to get a rating," said Michael Wheelhouse, banking analyst at London-based Nomura Research Institute. "None of the Czech banks, which are stronger, are even rated yet."
Harris Samaras, associate analyst at Moody's Interbank Credit Services, said that Moody's is planning to assign ratings to another 50 or more banks in the region, some solicited, others not.
Samaras also pointed out the significance of the debt rating assigned last May to the Republic of Poland, a precursor to the country's first Eurobond issue. "The rating has a lot to do with sovereign rating," Samaras explained. "If a bank has an investment grade, it can raise money on the international market." Moody's was the only one of the three agencies (the other two being Standard & Poor's and IBCA) that assigned Poland an investment grade rating. It is very rare for banks or corporations to receive a rating higher than the sovereign.
BDK's ratings present a mixed picture of the bank's financial credibility. The Ba3 rating, while speculative, reflects BDK's legal status as a bank wholly-owned by the State Treasury, and hence with an implied government assurance of debt repayment.
The financial strength rating, however, is designed to provide an assessment of the bank's inherent financial strength and doesn't take into account external credit supports like possible government bail out. The E+ grade puts the bank at the top of the lowest category.
The agency said that the rating reflected BDK's nascent regional banking franchise in a developing market, improved profitability and better solvency following restructuring assistance received in 1993.
"We are just happy to get a rating," said Andrzej Lulek, vice president of BDK's management board. "To be the first Polish financial institution to get a Moody's rating is quite a success."
"It's not a bad rating for us - we earned what we got," Lulek said. "The rating reflects the obvious fact that we are very limited in terms of capital."
"Even with an E+ we are in quite good company," he added. Other banks allotted an E+ rating include Latin Americans Banco Economico and Banco do Brasil, and Italian Banco di Napoli.
Bank Depozytowo-Kredytowy, one of the nine regional banks carved out of the National Bank of Poland, has capital of zl. 260 million, making it the 12th largest Polish bank. The bank showed a net profit of zl. 68.9 million in 1994, more than triple the 1993 profits in real terms. Its return on equity in 1994 was 44%, and return on assets was 3.8%.
Lulek explained that the rating would not be used in issuing debt instruments, but for the simple fact of having a rating. "Prestige is very important for financial institutions - it's important for social perception of the bank," he said. "We're also competing on the international market with other financial institutions. They have to have some benchmark to judge us on, especially in transactions on the interbank market."
BDK concluded over 3,312 FX transactions in 1994 and placed around 3,000 deposits on foreign money markets. Its foreign portfolio consists of $95 million in U.S. and foreign treasury securities.
Miroslaw Wilkolek, BDK's treasurer, said that foreign banks, which had been suspicious, were showing a greater level of confidence since the rating had been assigned. "When a bank has such high profit growth, people think that it's because they're risky," he said.
The bank is also slated for privatization, though no deadline has been set, and as it becomes increasingly difficult to sell banks, management and advisors are doing what they can to make their banks more attractive both to investors and to the Ministry of Finance, which determines the order in which state banks are to be privatized.
HCBC (a Hong Kong investment bank) said last week that the domestic share offering for Bank Gdanski, slated for privatization this year, will be sold in installments, the first time this has happened in Poland. "This is also the first offering directed specifically to foreigners," said Andrzej Nowaczek, bank analyst at Wood & Co. "They realize that there is no way they can sell a bank in Poland."
BDK was originally expected to be one of the last regional banks to be privatized, but its move to get a rating may be seen as an effort to jump ahead in line of some of the others, said Ramin Habibi, managing director of Bank Research Eastern Europe, a Cyprus-based consultancy which has been assigning bank ratings since 1990. Habibi pointed out that Bank Gdanski used its BREE rating as leverage to begin privatization before Powszechny Bank Kredytowy SA, currently the next in line after Gdanski.
Now BDK is vying to gain the attention of the Ministry of Finance and investors. "We've got a good auditor now - Price Waterhouse - and a rating as well," Lulek explained. "Being rated means that we're not just another Polish bank - we are not unknown."
Moody's Interbank Credit Service Ltd. assigned BDK a mediocre speculative grade Ba3/not-prime deposit rating as well as a weak financial strength rating of E+, almost the bottom of the scale.
But many analysts were in the dark as to why BDK ordered the rating. "It seems odd they would spend the $40,000 or so to get a rating," said Michael Wheelhouse, banking analyst at London-based Nomura Research Institute. "None of the Czech banks, which are stronger, are even rated yet."
Harris Samaras, associate analyst at Moody's Interbank Credit Services, said that Moody's is planning to assign ratings to another 50 or more banks in the region, some solicited, others not.
Samaras also pointed out the significance of the debt rating assigned last May to the Republic of Poland, a precursor to the country's first Eurobond issue. "The rating has a lot to do with sovereign rating," Samaras explained. "If a bank has an investment grade, it can raise money on the international market." Moody's was the only one of the three agencies (the other two being Standard & Poor's and IBCA) that assigned Poland an investment grade rating. It is very rare for banks or corporations to receive a rating higher than the sovereign.
BDK's ratings present a mixed picture of the bank's financial credibility. The Ba3 rating, while speculative, reflects BDK's legal status as a bank wholly-owned by the State Treasury, and hence with an implied government assurance of debt repayment.
The financial strength rating, however, is designed to provide an assessment of the bank's inherent financial strength and doesn't take into account external credit supports like possible government bail out. The E+ grade puts the bank at the top of the lowest category.
The agency said that the rating reflected BDK's nascent regional banking franchise in a developing market, improved profitability and better solvency following restructuring assistance received in 1993.
"We are just happy to get a rating," said Andrzej Lulek, vice president of BDK's management board. "To be the first Polish financial institution to get a Moody's rating is quite a success."
"It's not a bad rating for us - we earned what we got," Lulek said. "The rating reflects the obvious fact that we are very limited in terms of capital."
"Even with an E+ we are in quite good company," he added. Other banks allotted an E+ rating include Latin Americans Banco Economico and Banco do Brasil, and Italian Banco di Napoli.
Bank Depozytowo-Kredytowy, one of the nine regional banks carved out of the National Bank of Poland, has capital of zl. 260 million, making it the 12th largest Polish bank. The bank showed a net profit of zl. 68.9 million in 1994, more than triple the 1993 profits in real terms. Its return on equity in 1994 was 44%, and return on assets was 3.8%.
Lulek explained that the rating would not be used in issuing debt instruments, but for the simple fact of having a rating. "Prestige is very important for financial institutions - it's important for social perception of the bank," he said. "We're also competing on the international market with other financial institutions. They have to have some benchmark to judge us on, especially in transactions on the interbank market."
BDK concluded over 3,312 FX transactions in 1994 and placed around 3,000 deposits on foreign money markets. Its foreign portfolio consists of $95 million in U.S. and foreign treasury securities.
Miroslaw Wilkolek, BDK's treasurer, said that foreign banks, which had been suspicious, were showing a greater level of confidence since the rating had been assigned. "When a bank has such high profit growth, people think that it's because they're risky," he said.
The bank is also slated for privatization, though no deadline has been set, and as it becomes increasingly difficult to sell banks, management and advisors are doing what they can to make their banks more attractive both to investors and to the Ministry of Finance, which determines the order in which state banks are to be privatized.
HCBC (a Hong Kong investment bank) said last week that the domestic share offering for Bank Gdanski, slated for privatization this year, will be sold in installments, the first time this has happened in Poland. "This is also the first offering directed specifically to foreigners," said Andrzej Nowaczek, bank analyst at Wood & Co. "They realize that there is no way they can sell a bank in Poland."
BDK was originally expected to be one of the last regional banks to be privatized, but its move to get a rating may be seen as an effort to jump ahead in line of some of the others, said Ramin Habibi, managing director of Bank Research Eastern Europe, a Cyprus-based consultancy which has been assigning bank ratings since 1990. Habibi pointed out that Bank Gdanski used its BREE rating as leverage to begin privatization before Powszechny Bank Kredytowy SA, currently the next in line after Gdanski.
Now BDK is vying to gain the attention of the Ministry of Finance and investors. "We've got a good auditor now - Price Waterhouse - and a rating as well," Lulek explained. "Being rated means that we're not just another Polish bank - we are not unknown."
