Press Releases / 22.10.2015
Press Release as of 22.10.2015
AK&M Rating Agency affirmed the national scale credit rating of Joint Stock Commercial Bank RUBLEV (license no. 3098) at 'A' lowering the rating sub-level (tier) from 2 to 3. The outlook is stable.
The 'A' rating indicates that Bank RUBLEV 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. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. August 14, 2015.
Headquartered in Moscow, Bank RUBLEV operates a branch network in ten regions of Russia. The Bank provides the whole range of banking products and services involving Russian rubles and foreign currencies to legal entities and private customers.
Bank RUBLEV qualifies as a medium-sized bank of Moscow and Moscow region in terms of the amount of business. The credit institution's position in the Russian market of banking services can be regarded as stable. As of September 1, 2015, the Bank ranked in the 100-200 range of the Russian banks in terms of the size of assets.
The Bank's credit rating is essentially supported by the growing key balance sheet metrics, the profitable operations, the equity and capital adequacy improvements.
Over the period from September 1, 2014 to September 1, 2015, Bank RUBLEV substantially improved its key balance sheet indicators (liabilities and assets). In particular, the Bank's liabilities increased by 19.3% from RUB 14,160.1 million to RUB 16,894.4 million. The funding base expansion enabled the Bank to increase assets by RUB 3,110.8 million to RUB 17,906.0 million (+21.0%).
It should be noted that the Bank's incomes grew faster than its assets did. For the same period, total investment in loans receivable and securities grew by RUB 4,027.3 million (+35.7%), which increased the Bank's potential for asset-side transactions.
We are pleased to see that Bank RUBLEV's operations are steadily profitable. In 2014, the Bank's pre-tax profit exceeded the previous year's result by 177.6%. In the first half of 2015, the Bank improved its profit improved by 4.9% year-on-year, which is a clearly positive rating argument given the shrinking profits in the banking sector of Russia.
Bank RUBLEV's operating performance substantially exceeds that of the banking sector of Russia, as evidenced by the steadily higher-than-average return ratios.
The growing equity of Bank RUBLEV contributes to its credit rating. Over the period from September 1, 2014 to September 1, 2015, the Bank's equity increased by 41.6% reaching RUB 2,088.7 million. The N1.0 and N1.2 ratios also grew notably.
On most of this year's reporting dates, the Bank's capital adequacy ratio has been close to the average level in Russia's banking sector, the core capital adequacy ratio being considerably above the market average. We also appreciate the high capital quality, the Bank's Tier 2 to Tier 1 capital ratio in the period under review staying equal to or below 10%, in compliance with the applicable guidelines of the Bank of Russia and the Basel Accord.
At the same time, the negative interest margin, the loan book deterioration and the low provisions are working against the Bank's rating.
We regard the outstripping growth of interest expense over interest incomes in the first half of 2015 resulting in a negative interest margin (-RUB 28.2 million) as a point of concern. Seeing as the Bank pursued a rather inefficient lending and deposit policy, its earnings mainly arose from fee & commission incomes and incomes earned in the exchange market, thereby increasing the dependence of the earnings profile on speculative activities, which means elevated risks of a failure to ensure a stable flow of income amidst today's highly volatile market environment.
The loan book deterioration also exerts pressure on the rating. As the share of top-quality loans looked down, the combined share of problem and non-performing loans grew by 3.8 p.p. Furthermore, the relative share of non-performing loans is twice above the average percentage in Russia's banking sector. Besides, the overdue debt level is also growing (from 5.0% as of July 1, 2014 to 6.3% on September 1, 2015), the bulk of the arrearage (89%) being attributable to loans with payment delays exceeding 30 days.
The insufficient amount of provisions is another risk factor. The Bank's provisions are below the amount of overdue loans with payment delays exceeding 30 days and not enough to fully cover the loans of quality grade 5.
Full Bank name: Joint Stock Commercial Bank «RUBLEV»
Short name: Bank RUBLEV
Joint Stock Commercial Bank RUBLEV has been operating in the market of banking services since 1994. The Bank has license no. 3098 for banking activities involving Russian rubles and foreign currencies accepted from retail and corporate clients issued by the Central Bank of Russia on March 4, 2015. The Bank has been participating in Russia's compulsory deposit insurance scheme since August 4, 2005.
AK&M Rating Agency assigned a credit rating to Bank RUBLEV for the first time on January 11, 2011. The last rating action in relation to the Bank was taken on November 11, 2014. All rating action announcements are available on the akmrating.ru website.
The rating is valid until October 2016. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Bank's creditworthiness are revealed.
For estimation purposes, we completely rely on the reliability of information provided by the Bank. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.
This press release is based on the Statement of assignment of a credit rating to Joint Stock Commercial Bank RUBLEV.
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.
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) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.
AK&M Rating Agency
Ul. Gubkina 3, Moscow, Russia
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.