Press Releases / 28.07.2014

Press Release as of 28.07.2014


CJSC AK&M Rating Agency affirmed the national scale credit rating of BANK ELITA at 'B++', tier 3. The outlook is stable.


CJSC AK&M Rating Agency affirmed the national scale credit rating of BANK ELITA at 'B++', tier 3. The outlook is stable.

The 'B++' rating indicates that BANK ELITA qualifies as a sufficiently creditworthy borrower. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal.

BANK ELITA, a minor regional credit insstritution controlled by the Government of Kaluga region (98.125% equity stake), specializes in raising funds from legal entities and individuals, lending to the corporate sector, individual entrepreneurs, and retail customers. The Bank's network comprises 5 satellite offices and 3 operational cash desks.

The credit institution's rating position reflects the acceptable equity capital adequacy and its high quality, the growing scale of transactions on both sides of the balance sheet, the well-structured liabilities and favorable investment pattern for the capital raised. The rating is additionally supported by the high level of long-term liquidity.

While being on a downward trend due to the outstripping growth of assets, the Bank's capital adequacy (the N1.0 ratio) stays on a comfortable level (11.7% as of June 1, 2014). The Bank's capital quality is extremely high, seeing as its core capital is dominating the equity capital structure. Over the last three years, the highest Tier 2 capital to Tier 1 capital ratio was a mere 10%, always staying far from the regulatory upper limits.

Over a fairly long span of time, the Bank's assets and liabilities were growing steadily. In 2013, they increased by 28.9% and 31.7%, respectively, easily surpassing the average levels in Russia's banking sector (ca. 16% for both assets and liabilities). At the same time, we note that the Bank's balance sheet indicators have not been growing since the start of 2014, obviously resulting from a higher pressure on the capital adequacy of ther credit institution. The future business development requires today's efforts to increase the equity capital through additional contributions to the authorized capital and/or subordinated financial instruments.

We appreciate the transparency of assets and liabilities of the credit institution as a positive rating driver. The Bank does not issue debt instruments (bonds) and does not invest in securities, which makes its financial profile immunte to stock market risks. BANK ELITA's active transactions in the interbank lending segment are short-term and small in scale, its counterparts normally being prime banks. The share of foreign currencies on both sides of the balance sheet is extremely small. The key funding source for the Bank is the capital deposited by customers qualifying as non-credit institutions (95% of the total obligations as of April 1, 2014), the main source of assets is loans receivable (70% as of the same date), the corporate segment playing a dominant role in both cases. Therefore, we estimate the credit institution's infrastructure risks as fairly low.

BANK ELITA traditionally maintains a strong long-term liquidity position. The N4 ratio estimated using AK&M Rating Agency's methodical guidelines has not decreased below 140% since January 1, 2012. As of June 1, 2014, N2 and N3 ratios also topped the average banking benchmarks, despite violent fluctuations (varying in the 20%... 240% range) capable of posing local liquidity problems on the short-term and medium-term horizons.

At the same time, the high concentration of liabilities in major customers, the unimpressive loan portfolio quality, the higher-than-comfortable credit exposure and the relatively low profitability are working against a higher credit rating.

As of June 1, 2014, the biggest group of depositors accounted for 41.2% of the Bank's liabilities (against 14.5% the year before). This imbalance bears certain risks for the funding base safety, notwithstanding the respectable status of a strategic investor formed in pursuance of the Russian Government's order.

We regard the quality of the Bank's loan portfolio as unimpressive. In less than one year, the combined share of quality grades 1 and 2 loans decreased from 84.3% to 68.3% as of June 1, 2014 (the average percentage in the banking sector being 86.2%). On the contrary, the relative share of problem and non-performing loans for the same period went up from 5.5% to 7.4% (6.1% in the banking sector). As a result, the share of loan arrears in the loan portfolio exceeds the average banking level (5.4% against 3.8% as of June 1, 2014). At the same time, the low percentage of loan arrears on retail loans (2.7% against the average percentage of 5.3% as of the same date) and a rather conservative policy of making provisions for possible loan losses are, in our view, partly offsetting the above-mentioned negative factors.

The higher-than-average credit exposure is putting certain pressure on the Bank's rating. In particular, the maximum amount of credit risk per borrower or group of related borrowers (N6 ratio) is extremely close to the upper limit established by the regulatory authority (25%). From 23.79% as of January 1, 2014, the N6 ratio increased to 24.95% on June 1.

Resulting from a somewhat lower pre-tax profit (by 14.5% in 2013), the profitability of BANK ELITA weakened as its key balance sheet indicators increased. At the end of 2013, the Bank's ROA ratio was 1.6% (1.8% in 2012), return on equity decreased to 11.4% (16.0% in 2012). While these ratios are not far below the average levels in Russia's banking sector (ROA=1.9%, ROE=15.2%) which also changed for the worse in 2013, the lower profits and lower profitability are constraining the upside potentital of the Bank's buffer capital.


BANK ELITA has been operating in the market of banking services since 1991. The Bank is registered by the Central Bank of Russia (registration no. 1399 as of March 6, 1991).

BANK ELITA is primarily committed to providing a whole range of banking services to SME businesses, extending financial support to innovative and modernization projects, implementing state retail mortgage lending programs all over Kaluga region, saving personal deposits and investing them in the real economy of the region.

As of April 1, 2014, the Bank's equity capital totaled RUB 317 million, assets reached RUB 3,279 million. BANK ELITA stood 456th in assets,609th in equity in Interfax-CEA's ranking as of the same date.

This press release is based on the Statement of assignment of a credit rating to BANK ELITA.


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.