The credit rating assigned to PJSC BANK URALSIB (hereinafter, URALSIB, or the Bank) is based on an adequate capital adequacy assessment, weak risk profile, and adequate funding and liquidity position, which corresponds to the Bank’s status (since November 2015, the Bank has been under the financial rehabilitation procedure) and satisfactory business profile assessment.
URALSIB is a universal bank ranking 22nd in terms of capital among Russian banks; the Bank is present in all federal districts of Russia, with dominant positions in Moscow.
Satisfactory business profile. URALSIB’s strategy is aimed at restoring its market positions while increasing operational efficiency, which is medium. Over the last three years, CTI stood at 63% and NIM was around 5%. The universal nature of the Bank’s activities defines its highly diversified operating income (Herfindahl-Hirschman Index is at 0.2), which, however, has been volatile over the last five years. The corporate governance assessment is positively affected by regulatory control over the Bank as an institution under financial rehabilitation procedure by the Bank of Russia and SC “Deposit Insurance Agency” (DIA). ACRA continues to assess the quality of management in the Bank and the effectiveness of its strategy taking into account changes in the composition of top management that occurred both at the beginning of the rehabilitation period and in the first half of 2018.
The adequate assessment of the Bank’s financial strength in terms of capital is based on acceptable capital adequacy by national standards (N1.2 at 9.27%, N1.0 at 10.23% as of June 1, 2019). In contrast, the tier-1 ratio, according to the Bank’s non-audited calculations, is high at 17.65% (as of March 31, 2019). The main difference between the tier-1 and N1.2 ratios is that the tier-1 calculation takes into account the income from the initial recognition of loans received from DIA (RUB 90.5 bln), which had a positive impact on the Bank’s capital adequacy via increased retained earnings. The Bank's capital generating capacity is assessed as acceptable for 2016–2018.
The Bank’s low risk profile assessment is based on the increased level of problem and potentially problem loans (16.6% of the portfolio, including NPL90+ at 8.6% (8.3% excluding interest accrued on NPL90+ of individuals with 100% reserve coverage), involuntarily restructured loans at 0.5%, and potentially problem loans at 7.5%, based on the analysis of the loan portfolio for the 30 largest groups of borrowers). At the same time, the loan portfolio concentration on the top 10 groups of borrowers (21% of the portfolio including loans to related parties) and high-risk industries (29% of IFRS Tier-1 capital falls on the construction and real estate sector) is assessed by ACRA as moderate. Assets and contingent liabilities with related parties are 52% of IFRS Tier-1 capital (the volume of loans granted to related parties is equal to 35%, interbank loans to NFK JSC are equal to 9.3%, and other claims and contingent liabilities with the parties related to the Bank amount to 7.7%).
The quality of the securities portfolio (34% of assets), which mostly includes federal loan bonds, is assessed as acceptable; therefore, market risk materialization is unlikely in the absence of macroeconomic shocks.
Investments in non-core assets amount to 10.8% of IFRS Tier-1 capital as of March 31, 2019 and include investment property and a share in the charter capital of a limited liability company.
The adequate liquidity cushion of the Bank is primarily attributable to the placement of funds raised from DIA as part of the financial rehabilitation procedure into high-liquid government bonds. Therefore, in a base case scenario, the short-term liquidity surplus amounted to RUB 60 bln, while the stress scenario revealed a slight shortage of 2.1% of liabilities. In addition, the average short-term liquidity ratio (STLR) has been around 100% since the start of 2019. As to longer-term liquidity, ACRA notes no considerable imbalances (as of March 31, 2019, the long-term liquidity ratio (LTLR) is assessed as adequate).
Well-balanced funding profile. The share of the largest funding source (individuals and individual entrepreneurs) in the Bank’s total liabilities is 39%, which is assessed as moderate. The concentration of the resource base on the largest lender (22% of liabilities) is increased, which is caused by fundraising through repo transactions with CCP NCC (ACRA rating AAA(RU), outlook Stable), while the concentration on the top 10 client groups amounts to 28% of liabilities. Within the 12-month horizon, no substantial outflows of funds are expected.
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:
A negative rating action may be prompted by:
No outstanding issues have been rated.
The credit rating has been assigned under the national scale for the Russian Federation based on Methodology for Credit Ratings Assignment to Banks and Bank Groups Under the National Scale for the Russian Federation and Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.
The credit rating of PJSC BANK URALSIB was published by ACRA for the first time on July 24, 2018. The credit rating and outlook are expected to be revised within one year following the publication date of this press release.
The credit rating is based on the data provided by PJSC BANK URALSIB, information from publicly available sources, and ACRA’s own databases. The rating analysis is based on the consolidated IFRS financial statements of PJSC BANK URALSIB, non-audited statements of PJSC BANK URALSIB (in respect of capital adequacy ratios under IFRS), and financial statements of PJSC BANK URALSIB composed in compliance with the Bank of Russia Ordinance № 4927-U dated October 8, 2018. The credit rating is solicited, and PJSC BANK URALSIB participated in its assignment.
No material discrepancies between the data provided and the data officially disclosed by PJSC BANK URALSIB in its financial statements have been discovered.
ACRA provided additional services to PJSC BANK URALSIB. No conflicts of interest were discovered in the course of credit rating assignment.
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