Press Releases / 28.12.2015
Press Release as of 28.12.2015
CJSC AK&M Rating Agency has affirmed the national scale credit rating of Bank Solidarnost (license no. 1555) at 'A', tier 2, with a stable outlook.
The 'A' rating indicates that Bank Solidarnost 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. February 24, 2015.
Headquartered in Moscow, the Bank has a branch network in 9 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.
The Bank qualifies as a medium-sized Russian credit institution 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 November 1, 2015, the Bank ranked in the 200-300 range of the Russian banks in terms of the size of assets and equity.
The key positive rating drivers for the Bank include positive changes in balance sheet performance indicators, steady profitable activity, a low level of overdue loans receivable and a smart interest policy.
For the 9-month period in 2015, the Bank's liabilities increased by 7.8% reaching RUB 11,107.3 million. This growth was driven by the client base expansion and higher cash balances on accounts of existing clients.
While the Bank's equity did not see an notable increase (+0.7%), the overall funding base expansion and a higher N1.0 capital adequacy ratio laid a foundation to an increase in the Bank's assets (+7.8%) and in the amount of asset-side transactions.
Bank Solidarnost has remained profitable in all quarterly periods of 2015, a positive difference from how things stood in 2014. Moreover, the Bank's profit performance is on an upward trend, its pre-tax profit for the 9-month period of 2015 exceeds the previous year's result by 28.6%. This achievement is especially laudable given the substantial decline (-81.8%) profits across the whole banking sector of Russia.
We are pleased to see the Bank keep its loan risks low, as evidenced by the current level of overdue loans receivable and their dynamics. As of November 1, 2015, only 0.5% of the Bank's loan were in arrears, almost 10 times below the average level in Russia's banking sector, and still decreasing, as distinct from the general trend. The current level of overdue debt makes a positive impact on the rated Bank's profit, reserves and equity.
A comfortable balance in interest rates on the Bank's deposit and lending operations contributes to its rating. Despite a much higher cost of funding, net interest spread has not fallen below 2.3% this year, which resulted in substantial net interest incomes.
At the same time, a high percentage of retail deposits, heavy investments in mutual funds, considerable dependence on the securities market are working against the Bank's rating.
One of the key points of concern is that the Bank Solidarnost's dependence on retail funding continues to growth. For the 9-month period in 2015, balances of private clients' current and deposit accounts increased by 31.2%. The share of this component in the Bank's liabilities has reached a peak of 62%. This, given the fairly high cost of funding in the retail segment, puts certain pressure on the efficiency of lending and deposit transactions of Bank Solidarnost.
The Bank keeps substantial investments in mutual funds (about 10% of the total portfolio of assets). The excessive volatility of this financial instrument poses high additional liquidity risks.
While benefiting from a highly diversified income structure, the Bank remains highly dependent on speculative activities in the securities market, which could exert pressure on the stability of the credit institution's earnings.
Full Bank name in English: Bank of trade-unions solidarity and social investment «Solidarnost»
Short name in English: Bank Solidarnost
Bank Solidarnost has been active in the market of banking services since 1991. The Bank of Russia registered it under no. 1555. The bank possesses general banking license 1555 as of July 21, 2015 and has been a member of Russia's deposit insurance system since February 10, 2005.
AK&M Rating Agency assigned a credit rating to Bank Solidarnost for the first time on February 18, 2010. The last rating action in relation to the Bank was taken on September 24, 2014. All rating action announcements are available on the akmrating.ru website.
The rating is valid until December 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 Bank Solidarnost.
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.