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ACRA upgrades QIWI Bank (JSC) to BBB+(RU), outlook Stable

The credit rating of QIWI Bank (JSC) (the Bank) has been upgraded to reflect stronger business profile of the Bank, as well as its strong capital adequacy assessment, adequate risk profile, and adequate liquidity and funding.

As of May 01, 2019, QIWI Bank (JSC) ranked 91st in capital and 92nd in assets among Russian banks. The Bank is owned and controlled by QIWI plc. The key beneficiary of QIWI plc is S.A. Solonin. The Bank is a part of the QIWI Group, a provider of payment and financial services.

Key rating assessment factors

The business profile assessment has been upgraded in view of the Bank's stronger market positions, including franchise and new banking products, and the exclusive access to proprietary technologies of QIWI Group (the Group). The Bank is a key element of the QIWI payment service provider, one of the leading providers of multifunctional payment services in the Russian and CIS markets. The Bank provides cash management and settlement services for the system; it maintains bank accounts and cards, services QIWI wallets, performs cash transfers, and accepts user payments. The Bank does not lend to legal entities, and loans to individuals are granted through Sovest installment cards project. The Bank's business profile assessment takes into account the low diversification of the Bank's business: in 2018, over 87% of the Bank's operating income came from commissions and fees related to the business of the Group.

The Bank's strategy is an integral part of the Group's strategy, which assumes holding current positions in the traditional lines of business and developing new online financial services focused on SMEs and self-employed.

In ACRA's opinion, the quality of the Bank's management is adequate and matches the scale and nature of its business: the management experience and qualification is sufficient of allow the Bank to act as the Group's settlement center and to develop its own bank services and products. The organizational structure of the Bank is simple; and no expansion of the branch network or business lines is expected.

The Bank's ownership structure is assessed by ACRA as transparent; there are no significant reputational risks.

The strong capital adequacy is based on the adequate capital adequacy under the national standards: the N1.2 CAR amounted to 10.6% as of January 01, 2019 compared to 19.9% as of May 01, 2019, which ensures a relatively high ability of the Bank to absorb risks in the next 12–18 months. ACRA stress test showed that the Bank is capable to withstand an increase in the cost of risk by over 500 bps and to maintain capital adequacy ratios within regulatory standards.

A factor that supports the Bank's capital adequacy is the strong capacity to generate capital: as of January 01, 2019, the averaged capital generation ratio (AGCR) calculated as a five-year average ratio of the financial result net of dividend and treasury shares to risk-weighted assets exceeded 700 bps.

The adequate risk profile of the Bank is a result of the adequate risk management assessment and the high quality of receivables outside the loan portfolio. Moreover, ACRA has taken into account high operational risks inherent to the business models of the Group.

The quality of loan receivables outside the loan portfolio is assessed as high because most of the interbank receivables are short-term deposits placed with the CBR (50% of net assets as of January 01, 2019) and large Russian banks (over 20% of net assets) in order to manage liquidity or to process payments of the Group's customers.

In addition, ACRA notes that the effects of the loan portfolio's credit risk on the risk profile of the Bank are limited regardless a significant increase (by three times within a year) in the volume of consumer loans issued by the Bank.

The Bank's funding and liquidity profile is assessed as adequate. The short-term liquidity position of the Bank is assessed as strong, as it demonstrates a surplus even under the stress scenario of ACRA. The long-term liquidity shortage indicator (LTLSI) is also assessed as strong due to the prevalence of high-liquid assets (accounts and deposits with the Central Bank of Russia, nostro accounts with banks, OFZs) in the Bank's assets.

ACRA assesses the funding profile as satisfactory because, after acquisition of Rocketbank, the Bank's concentration on household funds went up from 23.2% as of January 01, 2018 to 36.2% as of January 01, 2019. ACRA notes no concentration on the largest lenders.

Key assumptions

  • The Bank will stick to the current business model in the next 12–18 months;
  • The N1.2 CAR will not go down below 12% in the next 12–18 months.

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 positive rating action may be prompted by:

  • Higher diversification of the Bank's business and penetration of its franchise in new market segments, provided that the key risk profile indicators are not affected.

A negative rating action may be prompted by:

  • A material deterioration in the operating environment for the Bank and the Group, able to affect the Bank's business profile;
  • Lower marginality of the Group's transactions serviced by the Bank;
  • A significant increase in operational risks inherent to the key business of the bank and the Group;
  • A significant deterioration of the Bank's risk profile and capital adequacy ratios as a result of acceptance of material credit risks by the Bank. 

Rating components

Standalone creditworthiness assessment (SCA): bbb+.

Adjustments: none.

Regulatory disclosure

The credit rating was assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Banks and Bank Groups Under the National Scale for 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 QIWI Bank (JSC) was first published on July 02, 2018. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.

The assigned credit rating is based on the data provided by QIWI Bank (JSC), information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using IFRS financial statements of QIWI Bank (JSC) and financial statements of QIWI Bank (JSC) composed in compliance with the Bank of Russia Ordinance No. 4927-U dated October 08, 2018. The credit rating is solicited, and QIWI Bank (JSC) participated in its assignment.

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

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

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