Press Releases / 11.03.2015
Press Release as of 11.03.2015
RITZ BANK LTD
CJSC AK&M Rating Agency assigned a 'B+' national scale credit rating to Commercial Bank of Investment and Technology Development (license no. 2677). The outlook is stable.
The 'B+' rating indicates that Commercial Bank of Investment and Technology Development qualifies as a sufficiently creditworthy borrower. The full or partial debt restructuring risk is relatively low.
Commercial Bank of Investment and Technology Development qualifies as a small credit institution in terms of the amount of business. Headquartered in Moscow, the Bank operates a network comprising 1 satellite office and 1 stand-alone cash desk.
The Bank's core business is the provision of comprehensive services to corporate clients and lending to private customers. The Bank is not a member of Russia's compulsory deposit insurance system and does not possess a license to accept money deposits from individuals. Commercial Bank of Investment and Technology Development is in the 600-700 range among Russian banks in terms of assets and equity capital.
We appreciate the Bank's growing key performance indicators, acceptable quality of loans receivable, strong liquidity position and low credit exposure as the positive rating drivers.
The change of ownership at the Bank in March 2014 brought about a new business strategy and completely reshuffled the client base resulting in a substantial growth of the Bank's key balance sheet and operational performance indicators. In particular, the equity capital increased by 43.2%, assets almost twice, corporate deposits, the key source of funding, soared 3 times in 2014.
The impressive increase in net profits of the credit institution (RUB 106.0 million compared with RUB 279 thousand in 2013) also contributes to the rating. However, the growth was mainly driven by non-core income sources (balance of miscellaneous income and expenses).
The Bank's loans receivable are of acceptable quality. The loan book is dominated by loans of quality grade 2 (73.1% as of February 1, 2015). The percentage of loan arrears is 1.1%, far below the average level in Russia's banking sector (4.1% as of February 1, 2015).
The liquidity and credit risk ratios are comfortably far from the regulatory thresholds. Another positive argument is the Bank's strong liquidity position, the highly liquid assets covering 73% of the client deposits as of the last reporting date.
At the same time, the Bank's rating is constrained by the underwhelming diversification of obligations across funding sources and maturities, the heavy dependence on major clients, and the low equity capital.
The Bank's weak diversification of obligations across both funding sources and maturities impairs its credit rating. The Bank's obligations are almost entirely attributable to corporate deposits; the deposit maturity structure is dominated by short-term borrowings (72.6% as of February 1, 2015). Putting certain pressure on the N2 ratio, this imbalance forces the credit institution to convert a substantial part of its funding base into highly liquid assets with the lowest earning power.
Another risk factor for the Bank is the high funding base concentration within the group of major depositors. In particular, ca. 92% of the Bank's total liabilities were attributable to 10 principal lenders as of February 1, 2015.
The Bank's equity capital is a mere RUB 30 million above the lower limit set by the regulatory authority, resulting in a low capacity to absorb possible losses, which, in AK&M Rating Agency's view, constrains the Bank's rating. At the same time, the extremely high capital adequacy of Commercial Bank of Investment and Technology Development (about 50%) can be regarded as a foundation for expanding the amount of active and passive operations, which, with a well-balanced interest policy and a good underwriting performance, may significantly increase the Bank's profitability, thereby improving its financial profile.
Full Bank name in English: Company with Limited Liability «Commercial Bank of Investment and Technology Development» (IBDIT LTD)
Commercial Bank of Investment and Technology Development has been operating in the market of banking services since 1994. The Bank was registered by the Bank of Russia under no. 2677 as of February 10, 1994. The Bank possesses a license for banking operations involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of December 6, 2000.
This press release is based on the Statement of assignment of a credit rating to Commercial Bank of Investment and Technology Development.
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.
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