International rating agency Fitch Ratings forecasts the average oil price to reach $80 per barrel in 2023, according to its latest Global Economic Outlook (GEO).
Next year, it is expected to drop to $75 per barrel, and in 2025 – to $70 per barrel.
According to the agency’s analysts, the Japanese yen to the US dollar exchange rate will be around 145 yen/$1 at the end of this year, 135 yen at the end of 2024, and 125 yen at the end of 2025.
The single currency exchange rate in the next three years will be EUR 0.92/USD 1.
The pound sterling is expected to reach $1.25 in 2023-2024 and $1.2 in 2025.
The forecast for the Chinese currency at the end of this year is 7.2 yuan/$1, and for the next two years – 7.3 yuan/$1.
The international rating agency Fitch Ratings has upgraded the VR of ProCredit Bank (Kyiv) from ‘cc’ to ‘ccc-‘ and affirmed its Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘CCC-‘ and its Long-Term Local-Currency IDR at ‘CCC’.
“The upgrade reflects our view of ProCredit Bank’s moderately lower risk of failure, driven by stronger asset quality and profitability due to a less severe operating environment than previously expected,” the agency said in a statement on its website on Friday.
It added that the affirmation of the national long-term rating at ‘AA(ukr)’ with a ‘Stable’ outlook reflects the bank’s continued creditworthiness in the local currency relative to other Ukrainian issuers.
Fitch noted that ProCredit Bank’s IDRs are backed by the support of its parent ProCredit Holding AG & Co. KGaA (‘BBB/Stable Outlook’/bbb).
The agency added that the ‘ccc-‘ shareholder support rating reflects the view of the strategic importance of the Ukrainian bank for the holding, as well as potential limitations on the bank’s ability to use the parent company’s support, in particular, to service foreign currency liabilities.
It is noted that a default on priority foreign currency liabilities remains a real possibility due to the war, however, the bank maintains generally adequate foreign currency liquidity compared to its needs, which is facilitated by various capital and currency control measures introduced since the beginning of the war.
According to Fitch, ProCredit Bank will continue to service its external obligations: at the end of the first quarter of 2023, its external debt stood at a moderate 10% of total funding, consisting of EUR20 million of subordinated bonds and funding from international financial institutions.
The agency noted that the gradual improvement in the operating environment for Ukrainian banks has resulted in a more resilient loan portfolio quality for ProCredit Bank, as well as higher revenues and profitability than previously expected. As a result, although capital risks remain very high, Fitch believes that the bank is now less likely to face a material capital shortfall.
The agency recalled that ProCredit Bank’s asset quality indicators deteriorated sharply after the outbreak of the war, resulting in significant provisioning charges (3.4 times operating profit in 2022). “Risks to asset quality remain elevated and dependent on the outcome of the war, despite an improved operating environment in the first quarter of 2023,” Fitch stated.
It added that the bank earned UAH 211 million in net profit in the first quarter of this year after a net loss of UAH 1.8 billion in 2022, and expects an improvement in provisioning.
It is noted that the bank managed to increase its core capital ratio from 9.6% to 11.7% in the first quarter, but it remains modest.
ProCredit Bank was ranked 15th among 65 operating banks in Ukraine in terms of total assets (UAH 39.21 billion) at the beginning of June. Its net profit for the five-month period amounted to UAH 384.43 million.
The international rating agency Fitch Ratings has affirmed the long-term issuer default rating (IDR) in foreign and national currencies and the senior unsecured rating of Metinvest Mining and Metallurgical Group at ‘ССС’, the recovery rating is ‘RR4’.
“Metinvest’s ratings reflect the company’s sufficient funding over the next six months, supported by cash flow generation from its international asset base, few significant short-term maturities and existing cash position. This also reflects increased operational risk for the company following the military invasion Russia to Ukraine, including the occupation or damage of some of its assets, as well as severe logistical restrictions,” Fitch explained in a press release on Tuesday.
At the same time, it is noted that about a third of the company’s EBITDA in 2022 will be generated by its international assets.
The ‘CCC’ rating reflects Metinvest’s increased operational and financial risks. Ferrexpo plc has a higher ‘CCC+’ rating due to its lack of financial debt. Metinvest’s business profile benefits from upstream assets outside of Ukraine, maintaining its rating above Interpipe Holdings plc (CCC-), whose assets are wholly concentrated in Ukraine,” the agency explains.
Analysts predict that Metinvest’s sales will be around 50% of 2022 levels, with a gradual recovery between 2023 and 2025.
In addition, experts suggest that Metinvest will be considered an operating company in the event of bankruptcy and will be reorganized, but not liquidated.
According to analysts, Metinvest has limited liquidity: the company keeps most of its cash in offshore zones. The company continues to generate significant cash flows from its coal assets in the US, as well as its steel mills in Europe, and its iron ore and steel assets in Ukraine. This has helped offset the outflow of working capital in recent months.
Metinvest has minor upcoming maturities in 2022: its next significant maturity is $176 million due in April 2023 in connection with the redemption of its bonds, according to a press release.
As Yury Ryzhenkov, general director of Metinvest, said, the company is servicing its credit obligations, including Eurobonds, and intends to continue doing so in the future.
“We have not declared force majeure on debt. Unlike many Ukrainian issuers, we continue to service our entire loan portfolio, including planned payments on Eurobonds. And I think that we should have enough strength to do this,” he said. he.
Metinvest is a vertically integrated group of mining and metallurgical enterprises. Its enterprises are located in Ukraine – in Donetsk, Lugansk, Zaporozhye and Dnepropetrovsk regions, in European countries. In particular, in Bulgaria there is a Promet Steel plant with a capacity of 500 thousand tons of rolled metal per year, in Italy – Metinvest Trametal and Ferriera Valsider with a total capacity of 1.2 million tons per year. In the UK, the company owns the Spartan UK plant, which can produce 200 thousand tons of rolled steel per year.
The main shareholders of the holding are the SKM group (71.24%) and Smart Holding (23.76%), which jointly manage it.
Metinvest Holding LLC is the management company of the Metinvest group.
The international rating agency Fitch Ratings has downgraded its global economic growth forecast for 2022 to 2.4% from 2.9% expected in June.
“The European gas crisis, high inflation and a sharp acceleration in the pace of tightening of monetary policy in the world entail serious consequences for the economic outlook,” the updated Global Economic Outlook (GEO) said.
The global GDP growth forecast for 2023 has been lowered to 1.7% from 2.7%.
The eurozone and UK economies will fall into recession as early as this year, while the US will face a mild recession in mid-2023, Fitch predicts.
Eurozone GDP, according to the agency’s new forecast, will decrease by 0.1% in 2023 due to the consequences of the gas crisis (in June, an increase of 2.1% was expected).
The new forecast takes into account the complete or almost complete cessation of pipeline gas supplies from Russia to Europe. Fitch experts note that, despite the EU’s attempts to find alternative sources of supply, the supply of gas in the region will be significantly reduced in the near term, which will affect the industrial sector.
The growth forecast for the US economy for the current year has been worsened to 1.7% from 2.9%, for 2023 – to 0.5% from 1.5%.
“The recovery of the Chinese economy is constrained by quarantine restrictions and a downturn in the real estate market, and therefore we expect China’s GDP to increase by 2.8% in 2022 and grow by 4.5% next year,” Fitch said in a review. In July, the growth of the Chinese economy was predicted by 3.7% and 5.3%, respectively.
High and persistent inflation and rising inflationary expectations are forcing the Federal Reserve (Fed), the Bank of England and the European Central Bank (ECB) to become more hawkish in recent months, Fitch said. The base interest rates of the world’s leading central banks are rising at a much faster rate than one might expect.
According to Fitch’s forecast, the Fed will raise the rate to 4% by the end of this year and keep it at this level throughout 2023, while the ECB will bring the lending rate to 2% by December of this year. The base rate of the Bank of England will reach 3.25% by February 2023, agency experts believe.
The international rating agency Fitch Ratings has raised the long-term foreign currency issuer default rating (IDR) of JSC Ukrzaliznytsia (UZ) from “C” to “CC”.
The rating action follows Fitch’s upgrade of Ukraine’s sovereign ratings to ‘CC’ on 17 August 2022. This rating action has a direct impact on UZ’s IDRs as it is considered a state-related entity.
It indicates that the strategic importance of the company for the state increased after the start of the Russian-Ukrainian war in February 2022. Government incentive to support UZ remains strong, with the state providing non-refundable cash grants (UAH 10 billion) to support the company’s core operations. However, EP’s financial resources and cash flows depend more than before the war on the financial performance of the Ukrainian state, the agency also believes.
The rating action did not affect UZ’s standalone credit profile at ‘ccc’.
UZ’s Eurobond ratings are in line with its Long-term foreign currency IDR. Fitch clarifies that Eurobonds accounted for 75% of EP’s debt at the end of 2021.
Fitch Ratings has affirmed Ukraine’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a stable outlook, the agency said on its website.
“Ukraine’s ‘B’ IDRs reflect its track record of multilateral support and a credible macroeconomic policy framework that has underpinned a relatively high degree of resilience to the coronavirus shock. Ukraine’s human development indicators compare favorably with the peer group, it has a net external creditor position of close to 13% of GDP, and general government debt is somewhat lower than the ‘B’ median. Set against these factors are weak governance indicators, a high degree of legislative and judicial risk to policy implementation, and low external liquidity relative to a large sovereign external debt service requirement,” the report says.
“The stable outlook reflects expectations for gradual fiscal consolidation and continuation of macroeconomic policies that helped preserve broad stability in external finances during last year’s shock. The ability to issue eurobonds and available domestic liquidity has provided some limited space to manage a delay over the next six months in completing the first review of the IMF Stand-By Arrangement (SBA). The coronavirus shock temporarily reversed improvements made in recent years in terms of a declining debt burden and normalization of growth prospects after the 2014-2015 geopolitical and economic crises. At the same time, the political position of the administration has weakened somewhat and recent Constitutional Court policy reversals further underline the risks to SBA compliance, which constrain the rating,” according to the document.
