AK&M Rating Agency assigned the ‘B++’ rating score as per the national scale, with a stable outlook, to CJSC Commercial Bank Russky Slaviansky Bank / RUSSLAVBANK. The ‘B++' rating indicates that CJSC RUSSLAVBANK is qualified as a sufficiently reliable borrower (the highest sub-grade of the ‘B' grade).
CJSC RUSSLAVBANK (registration no. 1073) specializes in commercial and consumer crediting and transfers of moneys via the CONTACT system. Overall, the Bank’s activity covers 11 regions in 6 federal districts. The bank has been participating in the Deposit Insurance Scheme since 2004. As of 1/1/2010, the Bank ranked 152nd in the amount of assets as per RAS (about RUB 14.3 billion), its equity capital totaled RUB 1.38 billion, pre-tax profit for 2010 was RUB 148.4 million.
The Bank’s rating score is supported by the operating efficiency, the widely diversified income structure; the high liquidity; the widespread branch network; the high diversification of the customers placing their funds with the Bank; the good loan security; and the well-diversified resource base.
Other arguments for the rating score are: the optimal concentration of active transactions on large customers, and the wide geographical coverage. RUSSLAVBANK is the provider and clearing center for the CONTACT money transfer system.
The rating score is also supported by the diversification of customers placing their funds with the Bank which fits with the Bank’s activity profile (as of 1/1/2011, the 10 largest creditors accounted for 5.9% of the Bank’s liabilities), and the relatively high loan security (collateral to loans ratio as of 1/1/2011 was 338.5%).
The risk factors for the company are as follows: the low profitability; the poor quality of the loan portfolio; the large operating expenses; the low capital adequacy ratio (N1 equaled to 15% on 1/1/2010, 12.7% as of 1/1/2011), the deterioration of the resource base in 2010.
The high share of extended loans in the loan portfolio and the lack of conservatism in the loan provision policy exert pressure on the rating score. The rating score is also restricted by the upward trend in the long-term liquidity ratio (35.34% as of 1/1/2010, 87.92% as of 1/1/2011) and the high share of staff expenses in the bank’s assets.
RUSSLAVBANK has achieved good efficiency income structure meeting up-to-date requirements and challenges. Net interest income from servicing the international money transfer system CONTACT prevails in the Bank’s net income structure. The net interest income is appreciable both in absolute and relative terms generating a stable cash flow for the Bank. Furthermore, the share of net interest incomes has increased considerably over the last three years. As a whole, the Bank’s incomes may be seen as well-diversified.
Another argument for the rating score of RUSSLAVBANK is the high level of liquidity. Quick liquidity ratio (N2) and current liquidity ratio (N3) are high, far above the lower threshold values set by the bank of Russia. Quick liquidity ratio as of January 1, 2010 was 67.07%, current liquidity ratio was 77.15%. Besides, the share of liquid assets in the Bank’s balance sheet is traditionally high and is about 30% (reaching even 40% at some moments in crisis time). The other ratios indicating the Bank’s profitability (ROE, net loan return) are also quite high.
RUSSLAVBANK has developed a widespread branch network. The Bank is active in 11 regions of the Russian Federation. Its branch network consists of 58 points of sales of banking services: 7 branches, 1 representative office, 38 additional outlets; 9 stand-alone cash desks; 2 mobile cash transaction offices. This branch network enables the Bank to expand aggressively in the market and to increase its customer base.
RUSSLAVBANK is the provider and clearing center of the money transfer system CONTACT. Turnover of CONTACT for 2010 was 4.5 billion US dollars, the number of transactions reached 10 million. Developing its CONTACT network, the Bank services more than 500 resident banks of the Russian Federation and 145 non-resident banks. Overall, the Bank serves more than 1,800 loro accounts. The share of the CONTACT system in the national market is 16% of money transfers to the CIS and other foreign countries and 7% to recipients in Russia. The system has a powerful terminal network with over 50 thousand points of services in 90 countries worldwide. The CONTACT system is an important source of net income for the Bank.
At the same time, one of the main risk factors is the low quality of the Bank’s loan portfolio. The share of NPLs and problem loans is rather high (7.6% and 6.7%, respectively). The number of extended loans across the largest borrowers is far above average. The high share of arrears on the loans granted by the Bank and other funds placed by it almost (8%, higher than the average value in Russia’s banking system, 5.2%) and the high percentage of the loan arrears exceeding 90 days (80%) also indicate the poor quality of the Bank’s loan portfolio.
RUSSLAVBANK's activity involves considerable operating expenses as the Bank operates the international money transfer system CONTACT and has therefore to run many bank departments.
In 2010, the Bank’s resource base improved, with a slight increase in the liabilities. In 2010, total liabilities increased by approximately 10% reaching RUB 13.1 billion as of January 1, 2011. 2010 saw the Bank’s certified debt increase sharply (almost 7-fold from RUB 79.2 million to RUB 546.4 million). However, total debt liabilities accounted for 3.8% of the total balance which is not critical for the bank.
CJSC RUSSLAVBANK has been active in the market of banking services since 1990. Among the Russian credit institutions, it is a large-sized bank in the amount and volume of operations. The bank has 58 offices in 11 constituents of Russia. As of the end of 2010, it ranked 152nd in the amount of net assets in Russia (148th in early 2010). As of 1/1/2011, the Bank ranks 152nd in assets as per RAS (about RUB 14.3 billion), equity capital totals RUB 1.38 billion.
RUSSLAVBANK has general banking license no. 1073 granted to it by the Central Bank of the Russian Federation on January 5, 2003. In December 2004, , the Banking Supervision Committee of the Central Bank permitted RUSSLAVBANK to join the Deposit Insurance System (DIS). The Bank’s auditor is CJSC PricewaterhouseCoopers Audit.
CJSC RUSSLAVBANK provides all kinds of banking products and services involving Russian rubles and foreign currencies. Besides, RUSSLAVBANK is the clearing center for the CONTACT system, the first Russian system for private money transfers to recipients in Russia, the CIS and other foreign countries without opening accounts in rubles, US dollars or Euros.
This press release is based on the statement of assigning a credit rating to RUSSLAVBANK.
The rating score, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's reliability and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities to the Bank.
AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993.
AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Provision 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide business banking services to project and engineering entities implementing investment projects), the MICEX (as a prerequisite for including bonds in the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation base, for listing bonds and for providing access to the MICEX+ trading mode). Pursuant to an order of Russia's Government AK&M Ratings count for approving the capitalization increase procedure for banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.
CJSC Analysis, Consulting and Marketing Rating Agency
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Press release by: A.Y. Zolotokopov
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18