Rating agency RAEX (Expert RA) has downgraded its creditworthiness rating on Bank Sovetsky to B (the low level of creditworthiness). The rating carries a negative outlook, which means the strong likelihood of the rating being downgraded over the medium term. The rating was also removed from rating watch.
Previously the bank was rated at B+ (the moderate level of creditworthiness), with a developing outlook, the agency noted. The rating downgrade was primarily driven by a loss which totaled Rub 532 mln in January – May 2015. The negative financial performance continues to put pressure on the bank's capital adequacy ratio which equaled 10.2% as of June 1, the bank's lowest reading in 2015.
Furthermore, the agency noted that the writedown of bad debt in January — March 2015 had only a temporary effect on the bank's financial showings. As of June 1, 2015 the portion of loans of the 4th and 5th quality categories equaled 19.5%, or 5% higher than as of April 1.
The continuing deterioration of the asset quality and the permanent need for extra provisions put pressure on the bank's capital adequacy ratio and heighten risks that N1.0 can be violated, which stipulated the negative rating outlook.
