Russian rating agency RAEX (Expert RA) has changed its outlook for OFK Bank's credit rating to developing, which means the equal likelihood of the rating being both revised or left unchanged at the current level over the medium term. The rating was affirmed at B++ (satisfactory level of creditworthiness).
The rating was put on watch. Earlier the bank carried a positive rating outlook.
The rating was supported by acceptable capital adequacy ratios (as of March 1, 2016 N1.0 stood at 12.1%) and well-balanced assets and liabilities by maturity in the short-term horizon (as of March 1, 2016 N2 equaled 262%, N3 came to 148%, and high-liquidity assets accounted for 15.9% of gross assets). The agency is positive about the bank's high rates of return (ROE is equal to 80.9% for 2015 excluding events occurring after the balance sheet date) and high coverage of operating expenses by net interest income and net commission income (496% for 4Q 2015), but it pointed out that these high rates of return were also achieved on the back of income derived from the granting of big bank guarantees that the bank started granting aggressively in 2015.
The agency also noted that the bank maintains a high portion of the first and second quality category loans on its balance sheet (as of March 1, 2016 NPL accounted for 0.3% of the total credit portfolio).
The developing rating outlook is stipulated by substantial current outstanding tax claims on the part of the Federal Tax Service to a number of principals whom the bank provided with guarantees against the payment of excise duties.
The rating was pressured by high concentration of active operations on businesses associated with the high credit risk (as of March 1, 2016 big credit risks against assets, net of provisions, equaled 94.1%) and moderate security of the credit portfolio as of March 1, 2016 the coverage of the credit portfolio (excluding inter-bank loans), excluding the collateral of securities, sureties and guarantees, equaled 58.2%, and 76.7% taking these components into account. The agency still negatively assesses high concentration of the lender's credit risks on one sector. Most of the bank's borrowers and principals belong to one and the same industry, making their payment discipline more sensitive to changing conditions in this sector.
