Russian rating agency RAEX (Expert RA) has cut its creditworthiness rating on Moscow-based Bank ITB to B++ (the moderate level of creditworthiness), and set the developing rating outlook, which means the equal likelihood both of the rating being held at the current level and being revised over the medium term. The rating was put under watch. Previously the bank was rated at A (the high level of creditworthiness, Sublevel 3), with a stable outlook.
The rating revision was primarily driven by the decline in the bank's capital adequacy ratio (N1.0) from 12.5% as of April 1, 2015 to 10.6% as of July 1, 2015, and a steep outflow of funds held by businesses and individual entrepreneurs in June 2015 (the outflow totaled over 70% of the money of companies and individual entrepreneurs), the agency noted. Given the cash outflow of this category of clients the bank began to aggressively bump up household funds, the portion of which reached 75% of liabilities as of July 1, 2015 compared to 57% as of April 1, 2015. As funds were borrowed from households at higher costs "this trend will have an adverse effect on the bank's mid-term profitability".
"Notably, weaker financial results will also have a negative impact on the rating (the bank suffered a loss of over Rub 100 mln in January — June 2015)," the agency said in the press release. Moreover, aggressive lending in a new segment for the bank could further increase the default of the bank's credit portfolio.
The developing rating outlook, as RAEX noted, is determined by uncertainty surrounding the bank's development strategy amid a shareholder shakeup.
