International rating agency Moody's Investors Service has bestowed counterparty risk assessments on 34 Russian financial institutions, and also affirmed ratings of six banks.
In particular, Gazprombank's and the Bank of Moscow's long-term local currency and foreign currency deposit ratings were affirmed at Ba2, those of Home Credit Bank and MTS-Bank at B2, Renaissance Credit's at B3, and Khanty-Mansiysk Otkritie Bank had its rating affirmed at B1. The negative outlook was set for these ratings of all banks. Gazprombank's Baseline Credit Assessment (BCA) was affirmed at b1, those of Home Credit Bank, the Bank of Moscow, Khanty-Mansiysk Otkritie Bank at b2 (the level of adjusted baseline credit assessments of the Bank of Moscow and Khanty-Mansiysk Otkritie Bank differs (ba2 and b1, respectively), and Renaissance Credit and MTS-Bank had theirs affirmed at b3 (MTS-Bank's adjusted baseline credit assessment is b2). The full list of rating actions was disclosed in the agency's press release.
The analysts take into account Gazprombank's adequate liquidity and funding positions, its limited refinancing needs this year and onward, but also pay attention to the rising portion of bad debt and lower profitability.
Writing about the Bank of Moscow, Moody's, like in all other cases, points to deteriorated operating conditions in Russia, which adversely affects the lending institution's asset quality, financial results and capital adequacy. Meanwhile, the bank's liquidity positions, which are maintained by stable funding via deposit accounts, are assessed as comfortable, the bank's business is well diversified, and the financial institution holds strong positions in the highly competitive Moscow region. The bank's ratings take account of the strong likelihood of support on the part of the parent bank, VTB Bank.
Home Credit Bank's ratings take into account pressure on its asset quality, decreased profitability and faster growth of the credit portfolio in the past, which raises the likelihood of losses in the future. At the same time, Moody's takes into account the bank's decent capitalization indicators (the capital adequacy ratio was 24.4%, the tier 1 capital adequacy ratio was 17% as of year-end 2014), and also adequacy funding and liquidity indicators.
Factors behind Renaissance Credit's rating, on the one hand, are its focus on consumer lending, which is negatively affected by the current operating conditions, poor asset quality, losses and the modest likelihood of the return to profit over the next 12 to 18 months, and, on the other hand, capital support of its majority shareholder (Onexim Group), the still decent capital adequacy ratio under Basel standards (17% as of year-end 2014), and also adequate base on retail funding coupled with stable liquidity positions.
As regards Khanty-Mansiysk Otkritie Bank, Moody's, in particular, points to its strong funding and liquidity positions, and strengthened market positions. At the same time, deteriorated operating conditions in Russia have put pressure on the bank's financial indicators. Analysts point to the worsening quality of both the bank's retail and corporate credit portfolios and heightened credit risks as Bank Otkritie, which after the merger with Bank of Khanty-Mansiysk became part of merged Khanty-Mansiysk Otkritie Bank, previously specialized on unsecured consumer lending. Furthermore, Moody's noted that the bank's profitability and capitalization weakened due to higher credit expenses, lower margin and negative revaluation of securities. As of May 1, 2014 the bank's regulatory capital adequacy ratio equaled 11.7%.
MTS-Bank shows poor asset quality and amid higher credit expenses the bank posted a FY14 loss. In spite of stably high capital indicators (17.82% for the tier 1 capital adequacy ratio and 25.52% for gross capital as of January 1, 2015), the bank became more dependent on capital support of its shareholders, which is not that reliable form of support. At the same time, the bank's creditworthiness is maintained by its partnership with affiliated company MTS, high liquidity positions, and also improved risk profile (including given a drop in the portion of high-risk unsecured consumer loans).
Moreover, Moody's assigned counterparty risk assessments to these six banks, and also to other 27 Russian banks and the Agency for Housing Mortgage Lending (AHML). As the rating agency said in a note, this indicator 'measures' the likelihood of fulfillment by a financial institution, if it collapses, of its contractual obligations.
Long-term and short-term counterparty risk assessments were assigned, apart from seven lending institutions, to Akibank, Ak Bars Bank, Avtotorgbank, Baltinvestbank, Bank Zenit, Center-Invest Bank, Bank Agropromcredit, Bank Obrazovanie, Credit Bank of Moscow, Bank Derzhava, Eurofinance Mosnarbank, Dalnevostochny Bank, Gazbank, ING Bank, Interprombank, Morskoy Bank, Metallurgical Commercial Bank, NBD-Bank, Novicombank, OTP Bank, Pervobank, Petrocommerce, Rosdorbank, Rusfinance Bank, Russian International Bank, Russian Regional Development Bank and Tatfondbank. Assessment levels are also shown in the agency's press release.
