Russian rating agency Expert RA has affirmed Isbank's creditworthiness rating of A+ (the very high level of creditworthiness, Sublevel 3). Meanwhile, the agency revised its rating outlook from developing to stable, and removed the bank's rating from rating watch.
The stable outlook means the high likelihood of the rating being maintained at the current level over the medium term, RAEX noted in a press release.
The bank's rating is supported by its high capital adequacy, and well-balanced assets and liabilities in the short term. The lender's rating is also positively impacted by well-balanced assets and liabilities by periods in the long-term horizon and low currency risks.
"The bank intends to keep its moderately conservative lending policy, maintaining a solid cushion in terms of capital adequacy, which allowed us to raise our rating outlook from developing to stable," RAEX director for banking ratings Stanislav Volkov commented.
As key factors constraining the bank's rating analysts pointed to low ROE and the far-from-the-best structure of credit portfolio collaterals. The rating is also substantially influenced by the outflow of corporate and household money (7.5% from June 1, 2014 through June 1, 2015).
Furthermore, RAEX assigned a B++ rating (the satisfactory level of creditworthiness) to Eurocapital-Alliance. The developing outlook was assigned to the rating, which means the high likelihood of the rating being revised over the medium term. The rating was put under watch.
High capital adequacy and well-balanced assets and liabilities in terms of periods in the long term stand out among positive factors. The lender's short-term liquidity indicators are acceptable for the bank with no retail deposits in liabilities, but the drop of N3 as of specific dates is explained by the pressure on the loro demand account requirement from Bank Uzdan, with which Eurocapital-Alliance is set to merge, and a short-term inter-bank loans taken out from Bank Uzdan. The agency's analysts also pointed to low currency risks and acceptable information transparency.
The agency thinks that negative factors are the extremely low credit portfolio coverage ratio and its narrow base of corporate lenders. The agency's analysts highlight the bank's limited opportunities to diversify liabilities (the bank is outside of the Deposit Insurance (DI) System) and high concentration of active operations on entities associated with the risk credit risk.
The bank's rating is adversely affected by low business profitability as since 2014 the bank has lost a big portion of income from the provision of guarantees. "The procedure for folding the bank into Bank Uzdan is close to completion, and the bank will subsequently be added to the register of banks which provide guarantees under government and municipal contracts. Operating and financial risks associated with the reorganization are reflected in the developing rating outlook," Volkov added.
