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ACRA affirms ААА(RU) to Natixis Bank JSC, outlook Stable

The credit rating assigned to Natixis Bank JSC (hereinafter — the Bank) is based on a very high likelihood of extraordinary support from the parent entity with a high creditworthiness. The Bank’s standalone creditworthiness assessment is moderately high, in view of its strong capital adequacy position, adequate risk profile assessment, adequate liquidity and funding position, and satisfactory business profile.

The Bank is a credit institution that ranks 160th in terms of assets and 109th in terms of capital among Russian banks. The ultimate beneficiary owning 100% shares of the Bank is Natixis, a part of Groupe BPCE (second largest bank group in France) that provides a wide range of financial services.

Key rating assessment factors

Very high likelihood of extraordinary support from the shareholder. In ACRA’s opinion, in case of need, Natixis (hereinafter — Natixis Group, the Parent Bank, or the Supporting Organization) can provide the Bank with sufficient long-term and short-term financing and capital injections. The final assessment of the country risk of the jurisdictions of the Supporting Organization (France and other European countries, the USA, and others) relative to the Russia's country risk and the creditworthiness assessment of the Supporting Organization are determined by the Agency as strong.

The Agency assesses the degree of interrelations between the Bank and the beneficial shareholder as strong, because:

  • There is explicit operational integration between the Bank and Natixis Group (the Parent Bank establishes corporate procedures and risk management standards implemented by the Bank in compliance with the requirements of the Russian law);
  • The Bank’s board of directors mostly includes representatives of the Parent Bank;
  • Natixis is a main source of liabilities for the Bank;
  • Natixis grants guarantees for certain loans issued by the Bank.

In view of the above, the credit rating of the Bank is on par with the Russian Federation.

Business profile assessment remains satisfactory (bbb), considering low market positions and weak diversification of the operating income. The business strategy of the Bank has been stable, being a part of the general strategy of Natixis Group in the Russian Federation. Natixis Group uses the Bank to expand its customer base in the Russian Federation and to build relationships with counterparties, assess risks and markets, etc. A significant share of risks facing Natixis Group in Russia is accounted for on the balance sheet of the Parent Bank.

Significant loss absorption buffer has been supported by the high capital adequacy ratios demonstrated by the Bank (N1.2 = 18.6% as of June 1, 2018). Losses suffered by the Bank in 2017 following the plunge in the net interest incomes pushed the averaged capital generation ratio (AGCR) down to -4 bps for 2013–2017. If the declining AGCR trend persists, the capital adequacy assessment may degrade.

The Bank's loan portfolio concentration on the largest borrowers is still high. As of March 31, 2018, almost entire portfolio comprised loans issued to four groups of borrowers. The Agency notes that the bulk of loans issued to Russian borrowers is recorded on the balance sheet of Natixis Group. Because Natixis Group granted guarantees for certain loans, ACRA is of the opinion that the creditworthiness of the Bank's borrowers is acceptable. The Bank holds excess liquidity in highly reliable credit institutions. The risk management function is successful in managing the risks facing the Bank, and it also contributes to the assessment of such risks by the Parent Bank and the business processes within the entire Natixis Group. The risk assessment and management system is build using the expertise of Natixis Group and is considered by ACRA as adequate.

Strong liquidity position has been supported by a high volume of liquid and high-liquid assets. The calculations of the STLSI suggest that, in the base case scenario, the Bank has excess liquidity of about RUB 9.5 billion, while in the stress scenario, the excess exceeds 28% of the liabilities. The LTLSI is above 170%.

The main funding source for the Bank is the Supporting Organization (over 50% of the total liabilities). Such concentration results in a relatively low assessment of the funding factor. On the other hand, the concentration of funding sources in terms of their types, excluding the subordinated debt, is acceptable.

Key assumptions

  • Maintaining the current conservative development model and the high quality of loan portfolio;
  • Retaining shareholding and operating control by Natixis;
  • Capital adequacy ratio (N1.2) above 10% at the 12 to 18-months horizon.

Potential outlook or rating change factors

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A negative rating action may be prompted by:

  • A declining eagerness of Natixis Group to develop its business in the Russian Federation;
  • A substantial deterioration of the financial status of the Supporting Organization.

Rating components

Standalone creditworthiness assessment (SCA): a.

Adjustments: no.

Support: on par with RF.

Issue ratings

No outstanding issues have been rated.

Regulatory disclosure

The credit rating has been assigned under the national scale for the Russian Federation and is based on the Methodology for Credit Ratings Assignment to Banks and Bank Groups Under the National Scale for the Russian Federation, the Methodology for Analyzing Relationships Between Rated Entities and Supporting Organizations outside the Russian Federation, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.

The credit rating assigned to Natixis Bank JSC was first published by ACRA on August 18, 2017. The credit rating and credit rating outlook are expected to be revised within one year following the rating action date (August 08, 2018).

The credit rating was assigned based on the data provided by Natixis Bank JSC, information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using the IFRS statements of Natixis Bank JSC, IFRS statements of Natixis, the financial statements of Natixis Bank JSC drawn up in compliance with Bank of Russia Ordinance No. 4212-U of November 24, 2016. The credit rating is solicited, and Natixis Bank JSC participated in its assignment.

No material discrepancies between the provided information and the data officially disclosed by Natixis Bank JSC in its financial statements have been discovered.

ACRA provided no additional services to Natixis Bank JSC. No conflicts of interest were discovered in the course of credit rating assignment.

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