Press Releases / 01.07.2016
Press Release as of 01.07.2016
OJSC Moscow Joint-Stock Bank TEMPBANK
AK&M Rating Agency has revised the outlook on the credit rating of PJSC MJSB Tempbank (license no. 55) from 'stable' to 'negative'. The rating is affirmed at 'B+'.
The 'B+' rating indicates that PJSC MJSB Tempbank qualifies as a sufficiently creditworthy borrower. The full or partial debt restructuring risk is low. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. November 27, 2015.
The Bank is headquartered in Moscow. The branch network of PJSC MJSB Tempbank is developed in 14 regions of the Russian Federation. The Bank provides the whole range of banking products and services involving Russian rubles and foreign currencies to legal entities and private customers.
PJSC MJSB Tempbank qualifies as a medium-sized Russian bank in terms of the amount of business and has a fairly sustainable position in the Russian market of banking services. As of May 1, 2016, the Bank was in the 200-300 range among Russian banks in terms of asset size and equity capital.
The outlook revision reflects AK&M Rating Agency's concern over the Bank's financial performance impairments. Our expectations of stabilization in February were overturned by a number of negative trends which became apparent early in the year. In particular, the overdue loan debt increased considerably, while the loan book weakened.
The key positive rating drivers for the Bank include a further increase in the key balance sheet performance indicators, growing loans receivable, a smart interest policy, sufficient provisions for possible loan losses, and a considerable share of highly liquid assets.
The Bank's key balance sheet metrics improved in the last 12 months. In particular, assets increased by 1.9% reaching RUB 12.6 billion April 1, 2016. Liabilities increased by 2.5% to RUB 11.3 billion.
Of special note is that the Bank's net loans receivable increased at an outstripping rate in this period (+24.5%). This resulted in an increase in net interest incomes (+58.5% in the first quarter of 2016 against the same period in 2015).
Another positive rating driver is the Bank's effective policy of keeping the interest rates on asset-side and liability-side transactions well-balanced, which also contributes to the positive net interest income trend.
The Bank employs a conservative approach to making provisions for possible loan losses, which mitigates the risks of losses should the borrowers default on obligations. As of April 1, 2016 the Bank's reserves exceed the overdue debt 2.3 times and fully cover the amount of problem and non-performing loans.
We appreciate the good level of highly liquid assets. In 2015 and Q1 2016, their share in total assets never fell below 9.0%, the average percentage being ca. 15%. This essential achievement results from a high level of borrowings from clients accounting for about 70% of the total funding base. The sufficient level of highly liquid assets can mitigate negative factors of the stress scenario.
At the same time, the Bank's rating is constrained by a high (and growing) share of overdue loans, negative changes in the segment of poor-quality loans, unprofitable operations.
The total amount of overdue loans provided by the credit institution is growing, reaching 6.5% as of April 1, 2016, 0.9 p.p. above the average percentage in the banking sector of Russia as of the same date. From April 1, 2015 to April 1, 2016, the amount of loans in arrears increased 1.6 times to RUB 781.6 million.
While the overdue loans increased, the Bank also faced a deterioration in the loan portfolio quality. The combined share of poor-quality loans grew to 14.3%, which forced the Bank to substantially increase provisions for possible loan losses, loans receivable and their equivalents.
Another point of concern is that the credit institution posted a heavy loss of RUB 410.3 million for the first quarter of 2016.
Full Bank name: public joint-stock company «Moscow joint-stock Bank «Tempbank».
Short name: PJSC MJSB «Tempbank».
PJSC MJSB Tempbank operating in the market of banking services since 1989 is licensed by the Bank of Russia (license no. 55 as of June 23, 2015).
AK&M Rating Agency assigned a credit rating to PJSC MJSB Tempbank for the first time on July 27, 2012. The last rating action in relation to the Bank was taken on February 10, 2016. All rating action announcements are available on the akmrating.ru website.
The rating is valid until July 2017. 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 PJSC MJSB Tempbank.
The rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion 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.
AK&M Rating Agency
Ul. Gubkina 3, Moscow, Russia
Phone no.: (495) 916-70-30, fax no.: (499) 132-69-18.