ACRA retains "Rating under revision: developing" status for JSCB “Moscow Industrial bank” PC

The status “Rating under revision: developing” assigned to the credit rating of JSCB “Moscow Industrial bank” PC (hereinafter, the Bank) reflects ACRA’s opinion on a possible change in the Bank’s credit rating in the short term depending on the Bank of Russia's decision to grant a financial support to the Bank or another scenario for the Bank's business, which excludes any financial losses by creditors.

Key rating assessment factors

The BB+(RU) credit rating takes into account the Bank’s moderate degree of systemic importance and strong state influence on its creditworthiness. The Bank’s standalone creditworthiness assessment (SCA) is characterized by a satisfactory business profile assessment and adequate liquidity and funding positions, but weak capital adequacy and critical risk profile, which greatly constrain the credit rating.

Since mid-August until December 2020, the Bank had violated mandatory capital adequacy ratios due to the increased provisions for assets in August 2020. In particular, as of December 1, 2020, N1.1, N1.2, and N1.0 ratios were 2.99% each, while the minimum ratios required by the regulator are 4.5%, 6%, and 8%, respectively. The N1.4 ratio decreased to 2.37%, while the minimum figure required is 3%. In addition, N6, the maximum risk ratio for a single borrower or a group of related borrowers, significantly exceeded the maximum allowed figure of 25%.

ACRA is still expecting that in the short term, the Bank of Russia is highly likely to decide on: 1) provision of financial support to the Bank, taking into account the guarantee from January 21, 2019 of the continuity of the Bank’s activities during the implementation the regulator’s participation plan of measures to prevent the Bank’s bankruptcy, or 2) another scenario for the Bank's business, which excludes any financial losses by creditors.

The status “Rating under revision: developing” reflects ACRA’s need to conduct additional analysis of the Bank’s financial standing after the Bank of Russia takes a relevant decision. ACRA plans to review the credit rating status within the next 90 days.

Key assumptions

  • The state retaining its shareholder control over the Bank;
  • Capital and/or liquidity from the state if necessary.

Potential outlook or rating change factors

The “Rating under revision: developing” status assumes that the rating may be changed within the next 90 days.

Removal of the “Rating under revision: developing” status and affirmation or upgrade of the credit rating may be prompted by:

  • Recovery of capital position after capital injection from the Bank of Russia;
  • Significant decline in the share of problem loans and decline in the share of non-core assets on the Bank’s balance sheet;
  • The Bank of Russia's decision facilitating the financial sustainability of the Bank.

Removal of the “Rating under revision: developing” status as well as downgrade of the credit rating may be prompted by:

  • Loss of the shareholder control over the Bank by the state;
  • Lack of support in capital from the Bank of Russia;
  • Decline in liquidity and/or funding position.

Rating components

SCA: bb-.

Adjustments: none.

Support: state support, +2 notches to the SCA.

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 Analyzing Relationships Between Rated Entities and the State, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities. In order to determine certain factors of the standalone creditworthiness assessment, the Methodology for Credit Ratings Assignment to Banks and Bank Groups Under the National Scale for the Russian Federation was applied.

The credit rating of JSCB “Moscow Industrial bank” PC was published by ACRA for the first time on August 12, 2019. The credit rating and the credit rating outlook are expected to be revised within 90 days following the publication date of this press release.

The credit rating was assigned based on the data provided by JSCB “Moscow Industrial bank” PC, information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using the IFRS consolidated statements of JSCB “Moscow Industrial bank” PC and statements of JSCB “Moscow Industrial bank” PC composed in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited, and JSCB “Moscow Industrial bank” PC participated in its assignment.

No material discrepancies between the provided data and the data officially disclosed by JSCB “Moscow Industrial bank” PC in its financial statements have been discovered.

ACRA provided additional services to JSCB “Moscow Industrial bank” PC. No conflicts of interest were discovered in the course of credit rating assignment.

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