Russian rating agency RAEX (Expert RA) has affirmed its creditworthiness rating of B++ (the acceptable level of creditworthiness) on Interregional Industrial Construction Bank (based in Saransk). The rating carries a stable outlook.
The bank's rating is supported by high liquidity ratios on the short-term horizon (N2 equaled 346.4% as of May 1, N3 was equal to 173.6%) and higher ROE (from April 1, 2014 through April 1, 2015 ROE under RAS equaled 25.1%). The bank's rating is also positively influenced by high loan coverage indicators (as of early May the coverage ratio, taking into account sureties issued for granted loans, equaled 140%, and 237% excluding sureties), and the lender's moderately high capital adequacy ratio (on the specified date N1.0 equaled 16.2%).
As key factors limiting the rating the agency's analysts named high concentration of the bank's active operations on companies associated with high credit risks and poor credit portfolio quality (as of early May the portion of 4th and 5th quality category loans equaled 12.9%, extended loans grew from 17.9% as of May 1, 2014 to 32.4% as of May 1, 2015). Furthermore, the lender's rating is also substantially impacted by its insufficiently conservative reserve policy and high capital immobilization.
"The agency points to the high portion of assets falling to the borrowers that have specific signs of being affiliated with the bank. Based on the agency's calculations, they accounted for at least 25% of capital as of May 1, 2015. As N25, a ratio limiting the maximum risk associated with a bank's related parties at 20%, will be introduced on January 1, 2016, this factor influences the rating adversely," RAEX director for banking ratings Stanislav Volkov commented.
