Fitch Ratings has affirmed four Ukrainian banks at their 'CCC' Long-term foreign-currency Issuer Default Ratings (IDRs). The affected banks are Joint Stock Commercial Industrial & Investment Bank (PJSC Prominvestbank, PIB), ProCredit Bank (Ukraine) (PCBU), PJSC Credit Agricole Bank (CAB) and PJSC Alfa-Bank (ABU), Fitch said in a press release.

At the same time, Fitch has downgraded Ukrsotsbank's (Ukrsots) and PJSCCB Pravex-Bank's (Pravex) Viability Ratings (VRs) to 'cc' from 'ccc' and, following this, has placed both banks' 'CCC' Long-term foreign-currency IDRs on Rating Watch Negative (RWN).

Fitch has also affirmed PIB's, PCBU's and ABU's VRs at 'ccc' and CAB's VR at 'b-'. A full list of rating actions is available at the end of this rating action commentary.

Fitch said that all six banks' IDRs and National Ratings factor in the likelihood of support the banks may receive from their foreign shareholders. The affirmation of the four banks' 'CCC' Long-term foreign-currency IDRs and ABU's foreign currency senior debt ratings reflects the constraint of Ukraine's Country Ceiling (CCC), which captures the risk of transfer and convertibility restrictions and limits the extent to which support from the majority foreign shareholders of these banks can be factored into the ratings.

"The limited capital and currency controls introduced in 1H14 remain largely in force. Ukraine's Country Ceiling reflects the high risk of these controls being tightened further, to the extent that these would materially constrain or impede the private sector's ability to repay external debt," reads the press release.

The affirmation of the four banks' Long-term local-currency IDRs and PCBU's and ABU's senior unsecured local currency debt at 'B-', i.e one notch above the 'CCC' sovereign rating, reflects the strength of the shareholder support for these entities. The Negative Outlooks, however, take into account country risks, and in particular the risk, in extreme scenarios, of restrictions being placed on banks' ability to service their local currency obligations.

ABU's IDRs and senior debt ratings are driven by Fitch's view on potential support the bank may receive from other assets controlled by its main shareholders, including from its sister bank, Russia-based OJSC Alfa-Bank (AB; BB+/Negative). However, the probability of support is limited due to the indirect relationship with other group assets and the mixed track record of support from its main shareholders.

Both Ukrsots and Pravex remain up for sale after their parents made relevant announcements in early 2014, although there has been little progress so far given the difficult operating environment in Ukraine. Both parents target sale of their Ukrainian subsidiaries as soon as the opportunity arises. Fitch believes that current shareholders will likely have a high propensity to provide support to their Ukrainian subsidiaries prior to sale.

Following the downgrades of Ukrsots' and Pravex's VRs, their Long-term foreign-currency IDRs are no longer underpinned by their standalone creditworthiness. The Rating Watch Negative (RWN) on both banks' foreign and local currency IDRs and National Ratings reflects Fitch's view that shareholder support will probably become less reliable if the banks are sold, in particular to local shareholders.