OREANDA-NEWS. On August 18, 2008 Fitch Ratings has upgraded the ratings of Russia's BTA Bank (LLS) (BTA-Russia) to Long-term Issuer Default (IDR) 'B+' from 'B-' (B minus), Support 4' from 5' and National Long-term 'A-(A minus)(rus)' from 'BB+(rus)'. This follows the completion of Kazakhstan-based BTA Bank's (BTA; rated 'BB+'/Outlook Negative) acquisition of a 52% stake in BTA-Russia, the press-centre of KASE reported.

These ratings are removed from Rating Watch Positive (RWP). Negative Outlooks are assigned to the Long-term IDR and the National Long-term rating. The Support Rating Floor of 'No Floor' is withdrawn as BTA-Russia's ratings are now driven by institutional support. Its other ratings are affirmed at Short-term IDR 'B' and Individual 'D/E'

The upgrade reflects Fitch's view of the greater probability of support from BTA, should the need arise, now that the bank is majority-owned and will be fully consolidated into BTA's accounts.

At the same time, BTA's Long-term IDR is itself driven by potential sovereign support (Support 3'), which may not in all cases be allowed to flow through to its subsidiaries, in particular those based outside of Kazakhstan. Taking into account this factor and Fitch's assessment of the stand-alone strength of BTA, BTA-Russia's Long-term foreign currency IDR is currently three notches below BTA's.

The Negative Outlooks on the Long-term IDR and National rating reflect Fitch's view of potential deterioration in BTA's stand-alone financial strength (see announcement of 3 July 2008, 'Fitch Affirms BTA Bank; Highlights Downward Pressure On Individual Rating' on www.fitchratings.com). Any significant deterioration in BTA's ability to provide support may result in a downgrade for BTA-Russia.

Upward pressure on BTA-Russia's Individual rating may result from further strengthening of the franchise and better diversification of the funding base, coupled with an acceptable credit risk profile after acquisition. In respect to the latter, Fitch notes that BTA may transfer some of its larger Russian loan exposures to BTA-Russia. Downside risk for the Individual rating could result from significant loan losses or greater instability in the bank's concentrated customer funding.

BTA Bank (LLS), formerly Slavinvest Limited, is a mid-sized Moscow-based universal bank that operates through nine branches and 25 offices in Russia. It mainly focuses on corporate business and is also developing its retail franchise, predominantly in central and northwest Russia.