Rating agency RAEX (Expert RA) has downgraded its creditworthiness rating on Bank Solidarnost to B++ (the acceptable level of creditworthiness). The rating outlook was set at stable, which means the strong likelihood of the bank's rating remaining unchanged over the medium term, the agency noted in a press release.
Some time ago the bank was rated A (the high level of creditworthiness, Sublevel 3), with a negative outlook. The bank's rating upgrade was driven above all by the revision of the financial statement standing of the lending institution's rehabilitator, Probusinessbank, and its possibilities to support the bank. This is because of Probusinessbank's low capital adequacy ratio (N1.2 equaled 6.4% as of April 1, 2015), low coverage of operating expenses by net interest income and net commission income (8.7% in 2015) coupled with a loss of Rub 789 mln in January — March 2015.
Analysts also pointed to rising NPLs maintained on the bank's balance sheet and assets falling to non-residents, primarily due to insufficiently transparent requirements for letters of credit under foreign operations. Furthermore, the bank's rating is adversely affected by Bank Solidarnost's deteriorating credit portfolio quality (NPLs in the aggregate credit portfolio jumped from 11.4% as of April 1, 2014 to 29.2% as of April 1, 2015, and a surge in fourth and fifth quality category loans from 29.3% as of April 1, 2014 to 34% as of April 1, 2015).
The agency also pointed out that the bank is marked by high lending of related parties, with around 37% of gross assets falling to the bank's related parties (Probusinessbank) as of April 1, 2015.
