Press Releases / 15.12.2014
Press Release as of 15.12.2014
CJSC AK&M Rating Agency affirmed the national scale credit rating of Bank Solidarnost (license no. 1555) at 'A' tier 2, with a stable outlook.
The 'A' rating indicates that Bank Solidarnost qualifies as a highly creditworthy borrower. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal.
Bank Solidarnost qualifies as a medium-sized Russian credit institution in terms of the amount of business. As of November 1, 2014, the Bank ranked 243rd among Russian banks in terms of asset size, 284th in terms of equity capital 303rd in terms of net profit.
Bank Solidarnost headquartered in Moscow City is operating in 8 regions of Russia. Apart from the HQ, the Bank's branch network includes seven branches, two satellite offices, one operational office and one stand-alone cash desk. The Bank provides the whole range of banking products and services involving Russian rubles and foreign currencies to legal entities and private customers.
We regard the Bank's healthy and growing portfolio of loans receivable, low credit risks, and profitable operations as the key positive rating drivers.
In 2014, the bank's loans receivable remained on the growth trend. For the 9-month period, they increased by 16.3%, a much stronger performance compared with 2012 and 2013 (+1.1% and +8.0%, respectively). As of October 1, 2014, this asset item reached RUB 6,000 million being one of the main contributors to the growth on the revenue side.
The Bank maintains a healthy structure of loans receivable. As of November 1, 2014, combined share of problem and non-performing loans was 1.4%, far below the average level in Russia's banking system (6.6%), with a parity between the relative shares of loans of quality grades 1 and 2.
The level of arrears on loans, loans receivable and their equivalents has been steadily decreasing throughout 2014, as opposed to the upward trend in Russia's banking sector, which we regard as an advantage for rating purposes. As of October 1, 2014, the overdue debt percentage was 1.34%, an extremely low level.
The low overdue debt and the favorable debt profile improve the Bank's earnings, reserves and equity, indicate a smart risk management system and certainly contributes to the credit rating.
The Bank benefits from a low level of credit risk, the corresponding ratios being appreciably far away from the regulatory limits. As of November 1, 2014, N7 was 409.50%, N9.1 = 0%, N10.1 = 0.53%. The two latter ratios are better than the average ratios across the banking sector of Russia.
Another positive signal is the profitability of operations. Despite an adverse economic environment, the Bank's pre-tax profit for 9 months 2014 saw a relatively low contraction (-10%) and was commensurate with the previous year's performance as a whole.
At the same time, the low capital adequacy ratio, the worse N2 and N3 ratios and the heavy investment in mutual funds prevent a higher credit rating of the Bank.
In 2012-2013, the Bank's capital adequacy ratio decreased steadily but never went below 11% on most of the reporting dates (actually staying in the 11-12% range). However, we see CAR go below the 11% mark this year. This means lower opportunities to further expand the lending business and risks of shrinking profits in future.
The substantial decline of the N2 and N3 ratios is a point of concern. The highly liquid assets to demand liabilities ratio decreased from 80.46% on July 1, 2014 to 31.76% as of November 1, 2014; the liquid assets to short-term liabilities ratio dropped from 90.04% to 58.99%. While the applicable regulatory limits have not been violated, this powerful negative trend implies higher liquidity risks.
Additional liquidity risks arise from heavy (more than 10% of the total assets) investments in mutual funds whose profit performance is subject to excessive volatility.
Full Bank name: Bank of trade-unions solidarity and social investment «Solidarnost».
Short name: Bank «Solidarnost».
Bank Solidarnost has been operating in the market of banking services since 1991. The Bank of Russia assigned it registration number 1555. The bank has a general license for banking activities as of August 10, 2012 no. 1555 (updated). Bank Solidarnost has been a member of Russia's deposit insurance system since February 10, 2005.
Apart from the general license, Bank Solidarnost is licensed by Russia's Federal Financial Markets Service (FFMS) as a professional participant of the securities market. The Bank is licensed for the following activities: brokerage (no. 177-07122-100000 as of November 18, 2003); dealer activity (no. 177-07128-010000 as of November 18, 2003); securities management (no. 177-07138-001000 as of November 18, 2003); custody activities (no. 177-07142-000100 as of December 20, 2000), exchange intermediary license for commodity futures and options transactions in the exchange market (no. 1453 as of October 15, 2009).
This press release is based on the Statement of assignment of a credit rating to Bank Solidarnost.
The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Bank's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.
AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
CJSC Analysis, Consulting and Marketing Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.
CJSC AK&M Rating Agency
Ul. Gubkina 3, Moscow, Russia
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.