Press Releases / 20.06.2013
Press Release as of 20.06.2013
Commercial Bank National Standard Limited Liability Company
CJSC AK&M Rating Agency assigned an ‘A+’ credit rating as per the national scale to CB National Standard LLC (license no. 3421). The outlook is stable.
The ‘A+’ rating indicates that CB National Standard LLC qualifies as a highly reliable borrower. Risk of a delay in meeting liabilities is insignificant.
We regard the growing equity, high capital quality and adequacy, low percentage of problem and non-performing loans in the loan portfolio, comfortable level of loan arrears, growing net earnings and net profits, and fairly low funding costs as the essential positive rating drivers for CB National Standard LLC.
CB National Standard LLC has been consistently increasing its equity capital for the last six years, even though the growth rate is moderate. In 2012 and Q1 2013, the Bank’s equity capital increased by 7.6%; in the first quarter 2013 alone, the growth rate was 1.64%.
CB National Standard LLC maintains high quality of capital. As of May 1, 2013, Tier 1 capital accounted for 69.7% of the Bank’s equity capital, with the result of the capital quality ratio (Tier 2 to Tier 1 capital ratio) on the same date being 47.68%, against a weaker average ratio of 49.1% in Russia’s banking sector (corresponding to the average Tier 1 capital percentage of 67.1%). Besides, the Bank’s authorized capital accounts for 44.76% of its equity, which is twice the average level in Russia’s banking sector.
The low percentage of problem and non-performing loans in the loan portfolio also contributes to the rating of CB National Standard LLC. The low-grade loans account for a mere 1% of the Bank’s loan portfolio, 6.5 times below the average value in Russia’s banking sector.
Overdue loans granted by CB National Standard LLC are relatively low. Today, only 1.6% percent of the loans are in arrears, almost three times below the average percentage in Russia’s banking sector, indicating that the Bank’s lending policy is rather competent and well-balanced.
Net incomes of CB National Standard LLC are on the rise, increasing by more than 45% in Q1 2013 alone.
In 2011, 2012 and Q1 2013, the Bank raised capital at a rate below the Bank of Russia’s refinancing rate, which we appreciate as a positive signal for its credit rating. At the end of the first quarter 2013, the cost of debt was 6.08% per annum, the interest rate on customer deposits was 7.56% per annum.
In 2013, CB National Standard LLC stayed above the break-even point in terms of earnings. In the first quarter 2013, its net profit increased by 28.56% against the previous quarter to RUB 79.341 million, return on assets as of April 1, 2013 was 0.83%, return on equity was 5.67%.
At the same time, the slower net profit growth rate, a reduction in the borrowed funds and assets, growing loan arrears and high percentage of doubtful loans (reaching one-third of the Bank’s total loan portfolio) are exerting pressure on the rating of CB National Standard LLC.
In 2013, the annual net profit growth rate of CB National Standard LLC decreased. For the 12-month period ending on April 1, 2013, the Bank’s net profit increased by a mere 3.21%, a much weaker result compared with the full-year 2012 and 2011 periods.
Another negative driver for the rating is that CB National Standard LLC reduced its borrowings in the first quarter 2013. For January-March, the Bank's liabilities decreased by 15%. This, to a certain extent, has triggered a reduction in the Bank’s assets (-13.1% for the same period).
The share of loan arrears in the Bank’s loan portfolio increased in 2013, which is unfavorable for its rating. However, while growing by 60.7% in April 2013, the loan arrears still account for no more than 1.6% of the Bank’s loan portfolio, which offsets the magnitude of this negative driver. Furthermore, as of May 1, 2013, the pool of overdue loans shrank by 11% against the end of 2012.
The rating of CB National Standard LLC is also impaired by the high percentage of doubtful loans in its loan portfolio (32.4% as of May 1, 2013, more than 3 times above the average value in Russia's banking sector).
CB National Standard LLC operating in the market of banking services since 2002 has recently been among the hundred largest Russian banks in terms of assets and equity capital. As of April 1, 2013, the Bank ranked 97th in assets (RUB 44,048 million), 99th in equity (RUB 6,801 million), 133rd in retained earnings in Russia, as estimated by Interfax-Center for Economic Analysis.
CB National Standard LLC is licensed by the Bank of Russia to provide banking services involving Russian rubles and foreign currencies to individuals and legal entities and possesses non-expiring licenses for professional dealer, brokerage, depositary and securities management activities. CB National Standard LLC is registered as a member of the deposit insurance scheme. Alongside with all kinds of banking services, the Bank is committed to investment activities. The Bank focuses on services and loans to corporate customers, operations in the securities market. The retail segment is not among its development priorities.
CB National Standard LLC is the parent credit institution of a consolidated banking group, with JSC CB Russky Yuzhny Bank and NS-Finance LLC as subsidiaries.
Headquartered in Moscow, CB National Standard LLC has two branches in Stary Oskol, Belgorod region, and in Novorossiysk, Krasnodar Krai. The Bank has supplementary business units: two satellite offices in Moscow, one satellite office in Belgorod, one satellite office in Gubkin, Belgorod region, one satellite office in Novorossiysk, and one operational office in Voronezh.
Short name: National Standard Bank
Full name: Commercial Bank National Standard Limited Liability Company
The Bank's auditor is CJSC Deloitte & Touche CIS.
This press release is based on the statement of assigning a credit rating to CB National Standard LLC.
The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Bank's reliability and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities.
CJSC 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.
CJSC AK&M 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).
AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Regulation 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide cash and settlement services to project and engineering companies implementing investment projects), and the MICEX (for the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation and bond listing purposes). By a resolution of Russia’s Government AK&M Ratings count for the recapitalization of banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.
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