Russian rating agency RAEX (Expert RA) has lowered its creditworthiness rating on Moscow-based J&T Bank to A(I). The stable outlook was set for the rating. The bank was previously rated at A+(III), also with a stable outlook.
The rating downgrade reflects the agency's expectations about tighter regulation (including with regard to concentration of operations on related parties) and a forecast increase in uncertainty regarding importance of the lending institution for beneficial owners within a long horizon in the absence of substantial drivers for business and the bank's competitive positions in the Russian banking market, RAEX said in a press release. In addition, analysts noted that the bank's rating is limited by unprofitable operations (since October 1, 2015 post-tax ROE stood at minus 5.1%). Meanwhile, the agency was provided with plans to improve the bank's profitability until end 2016, including by restoring loan loss provisions. The rating is restrained by considerable concentration of assets on objects associated with the big credit risk, and also by a small number of the bank's units in the region of presence.
The rating is positively affected by the bank's high capital adequacy ratios (as of November 1, 2016 N1.0 stood at 25.7%, while N1.1 and N1.2 were equal to 24.5%), and also well balanced assets and liabilities by maturity in the short-term horizon (as of the specified date N2 was 132.5%, and N3 equaled 304.8%, and high-liquidity assets accounted for around 17% of gross assets). Moreover, the agency is upbeat about low overdue loans provided to legal entities and individual entrepreneurs (2.2% of the credit portfolio for businesses and individual entrepreneurs as of early November), and the presence of a securities portfolio, against collateral of which, if necessary, extra liquidity may be raised.
