Russian rating agency RAEX (Expert RA) has lowered its creditworthiness rating on United Credit Bank (based in Yaroslavl) to B+ (quite low level of creditworthiness). The negative outlook was set for the rating. Previously the bank's creditworthiness rating was B++ (satisfactory level of creditworthiness), with a stable outlook.
As the agency noted in a press release, the rating downgrade was driven, in particular, by a reduction in the coverage ratio. As of February 1, 2016 the credit portfolio coverage ratio, excluding collateralized securities, sureties and guarantees, equaled 16% vs. 26% the year ago. The rating is also negatively affected by the policy of lending households for long terms without any collateral (a considerable portion of these loans was granted in the fourth quarter of 2015). Furthermore, the agency is downbeat about a rise in assets that, longer term, would be recorded as the bank's expenses (balances held on Account 60312 of Form 101 "Settlements with Suppliers, Contractors and Buyers" for the period from August 1, 2015 through February 1, 2016 jumped roughly 33%), and higher investment in poorly liquid securities (obligations of issuers without high credit ratings). Among negative factors the agency still points to the bank's moderate capital adequacy (N1.2 stood at 7.8% as of early February) and the high level of big credit risks.
As for positive factors, the agency highlighted high rates of return (ROE equaled 21.6% in 2015, excluding gratuitous aid) coupled with high coverage of operating expenses by net interest and commission incomes (267.9% for 4Q 2015). The rating is backed by the modest proportion of overdue debt in the credit portfolio (roughly 2.1% as of early February) and the acceptable balance of assets and liabilities by maturity in the short-term and long-term horizon.
