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 (SCA) is moderately high, in view of its adequate capital adequacy position, adequate risk profile assessment, adequate liquidity and funding position, and satisfactory business profile.

The Bank is a credit institution that ranked 123rd in terms of assets and 112nd in terms of capital among Russian banks as of end-June 2020. 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, if necessary, 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 Russia’s country risk and the creditworthiness assessment of the Supporting Organization are determined by the Agency as strong.

ACRA assesses the degree of interrelations between the Bank and the beneficial shareholder as strong, due to the following:

  • 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 Russian law);
  • The Bank’s board of directors mostly includes representatives of the Parent Bank;
  • The Parent Bank is the main source of funding for the Bank;
  • The Parent Bank 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.

The business profile assessment remains satisfactory, considering low market positions and weak diversification of the operating income (the Herfindal-Hirshman index stood at 0.57 as of end-March 2020). 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.

The capital adequacy of the Bank is assessed as adequate amidst satisfactory loss absorption buffer levels (N1.2 was 12.6% as of end-March, 2020). The average capital generation ratio (AGCR) stood at -19 bps at year-end 2018 as the 5-year average between 2015–2019 as calculated by ACRA.

Adequate risk-profile. As of end-March 2020, the majority of the Bank’s portfolio (59.8% of total assets) comprised of loans issued. ACRA notes that the bulk of loans issued to Russian borrowers is recorded on the balance sheet of Natixis Group. Because Natixis Group continues to provide guarantees for certain loans, ACRA considers that the creditworthiness of the Bank’s borrowers is acceptable. The Bank holds excess liquidity in highly reliable credit institutions.

The risk management function has been effective in managing the risks facing the Bank over the years, 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 built using the expertise of Natixis Group and is considered by ACRA as adequate.

Liquidity and funding is assessed as adequate and 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 6 bln, while in the stress scenario, the excess exceeds 14% of liabilities. The LTLSI is comfortably above 100%. The main funding source for the Bank by far is the Supporting Organization. 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

  • The current emphasis on conservative development model and the high quality of loan portfolio is maintained;
  • Retained shareholding and operating control by Natixis;
  • Capital adequacy ratio (N1.2) above 12% within the 12 to 18-month 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:

  • Declining importance of the Russian market to Natixis Group;
  • Substantial deterioration of the creditworthiness of the Supporting Organization.

Rating components

SCA: a-.

Adjustments: none.

Support: on par with the 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 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 of Natixis Bank JSC was first published by ACRA on August 18, 2017. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.

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, and the financial statements of Natixis Bank JSC drawn up in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited, and Natixis Bank JSC participated in its assignment.

Disclosure of deviations from the methodology. The cost to income ratio (CTI) was assessed with a deviation from the applied methodology. The increased value of this indicator does not affect the creditworthiness of Natixis Bank JSC, given the way in which Natixis Bank JSC’s profit is reflected on the balance sheet of the Parent Bank.

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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