Russian rating agency RIA Rating has affirmed its national scale creditworthiness rating of A- on Russlavbank, a stable outlook.
The primary factor supporting the rating is high support on the part of the bank's shareholders. For the record, in 2014 Russlavbank got several subordinated loans for Rub 1 bln, and also raised its charter capital by Rub 1.5 bln. Shareholders' support shows that the shareholders are greatly interested in the bank's development. The agency thinks that Russlavbank can rely on shareholders' extra support over the medium term.
A moderately positive factor for the rating is still quite sizeable liquid assets. Meanwhile, the bank's instant liquidity ratio (N2) equaled 67.1% as of April 1, 2015, while its current liquidity ratio (N3) was 124%. RIA Rating experts believe that the risk associated with the loss of the bank's liquidity in the short and medium term is assessed as moderate.
Notably, balances held on loro accounts have grown rapidly in recent months (over Rub 2.5 bln in the past three months), a sign of restoring confidence of counterparties in the bank. The agency noted in a press release that the lender keeps cooperation ties with leading Russian and global banks, is also transparent in terms of information, including the good quality of financial and annual records.
Rating constraining factors are still modest capital adequacy (11.16% for N1.0 and 7.06% for N1.2 as of April 1, 2015). The modest capital adequacy ratio determines the bank's high sensitivity to macroeconomic conditions.
A negative factor is a sharp rise in interest expenses and, consequently, a contraction in the bank's operating profit. The bank is characterized as heavily reliant on retail deposits (retail deposits account for around 50% of its liabilities).
In the medium term the bank's substantial dependence of funding on retail deposits could affect its stability amid macroeconomic instability, and also the high cost of this type of funding.
