ACRA affirms The joint-stock Bank “ROSEVROBANK” at A(RU), outlook Stable, and withdraws the credit rating

ACRA affirmed The joint-stock Bank “ROSEVROBANK” (hereinafter, REB or the Bank) at А(RU), outlook Stable, in view of the strong capital adequacy, as well as adequate assessments of risk profile and liquidity and funding position. The factor of support from the majority shareholder (PJSC Sovcombank (A(RU), outlook Stable, that owns 90.01% of the Bank's share) is assessed as neutral.

ACRA withdraws the credit rating and credit rating outlook due to termination of the agreement with REB.

REB is a universal private bank operating a wide branch network across Russia. Its priority business lines are lending to large companies and medium-sized businesses, issue of guarantees, cash management, salary projects, brokerage services as well as factoring and leasing services offered through its affiliates “R.E. Factoring” and “RosEvroLeasing.”

Key rating assessment factors

Adequate business profile is determined by the Bank’s stable position in the corporate lending segment. The business profile assessment is further backed by a sufficient level of asset and operating income diversification and a comparably high operating efficiency of the Bank (for the last three years, CTI is about 40% and NIM is about 60%).

Strong core capital safety buffer is attributed to the Bank maintaining a substantial loss absorption cushion by both regulatory norms (as of October 01, 2018, N1.2 ratio was 10.8% with the required minimum of 7.875%) and Basel standards (Tier-1 ratio was 18.3% as of June 30, 2018), which enables REB to withstand a growth of credit risk by more than 500 bps. REB’s capital generation capacity remains high (about 200 bps on average for the last five years).

Adequate risk profile assessment is explained by a high enough quality of the loan portfolio (55% of assets), featuring a low share of problem and potentially problem loans (5.5% of the portfolio, including  1.5% of NPL90+, 1.4% of restructured loans, and 2.6% of potentially problem loans), backed by an acceptable concentration of the portfolio on top 10 borrowers (25%). The share of loans issued to companies in high-risk industries (31% of the common capital under IFRS) and related companies (17% of the common capital under IFRS) have remained low. The quality of the portfolio of contingent liabilities (guarantees and sureties issued; the volume corresponds to one third of assets) is assessed as high enough. Market and operational risks facing the Bank are acceptable. The risk management system of the Bank is adequate.

Strong liquidity position is based on a high volume of liquid assets, which is expressed in a sound coverage of potential funds outflow by high-liquid assets (since early 2018, the short-term liquidity ratio averaged to 95%).

Well-balanced funding profile. Funds of legal entities (61% of total liabilities) constitute the pillar of the Bank’s funding. REB does not attract any funding from the regulator. ACRA notes that the Bank is not ostensibly reliant on funds from its largest creditor (4.1% of liabilities) and/or group of 10 largest creditors (13.3% of liabilities).

As to support from the majority shareholder, ACRA makes no additional adjustments, as creditworthiness assessment of PJSC Sovcombank equals the SCA of REB.

Key assumptions

  • The merger of PJSC Sovcombank and REB will be closed in November 2018.

Rating components

SCA: а.

Adjustments: none.

Support: no systemic importance.

Issue ratings

No debt securities in free float.

Regulatory disclosure

The credit rating of The joint-stock Bank “ROSEVROBANK” was 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, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.

The credit rating of The joint-stock Bank “ROSEVROBANK” was published by ACRA on April 28, 2017 for the first time. The rating action on affirmation and withdrawal of the credit rating assigned to The joint-stock Bank “ROSEVROBANK” and the credit rating outlook was taken on October 31, 2018.

The assigned credit rating is based on the data provided by The joint-stock Bank “ROSEVROBANK”, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using IFRS consolidated statements of The joint-stock Bank “ROSEVROBANK” and statements of The joint-stock Bank “ROSEVROBANK” composed in compliance with the Bank of Russia Ordinance No. 4212-U dated November 24, 2016. The credit rating is solicited, and The joint-stock Bank “ROSEVROBANK” participated in its assignment.

No material discrepancies between the provided information and the data officially disclosed by The joint-stock Bank “ROSEVROBANK” in its financial statements have been discovered.

Disclosure of deviations from the approved methodologies. The short-term liquidity shortage indicator and the long-term liquidity shortage indicator were not calculated; the liquidity factor was assessed based on the reports of The joint-stock Bank “ROSEVROBANK” made as per forms 0409122 and 0409125.

ACRA provided additional services to The joint-stock Bank “ROSEVROBANK”. No conflicts of interest were discovered in the course of credit rating assignment.

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