ACRA assigns ААА(RU) to PJSC ROSBANK, outlook Stable

The credit rating assigned to PJSC ROSBANK (hereinafter — ROSBANK, Bank) is based on a very high probability of the Bank obtaining extraordinary support from its parent bank that boasts high level of creditworthiness. ROSBANK’s high standalone creditworthiness assessment (SCA) is characterized by comfortable capital adequacy, an adequate risk profile, and satisfactory liquidity and funding positions.

ROSBANK is a systemically important full-service bank holding leading positions in the Russian banking sector in terms of assets and capital (enters the top-10 list in terms of capital among banking groups) and operating in 71 RF regions. The Bank is a 99.95%-owned subsidiary of Societe Generale S.A. domiciled in France (a parent bank of the international financial group Societe Generale, hereinafter — SG Group), and together with its wholly-owned subsidiaries Limited Liability Company Rusfinance Bank and JSC Commercial Bank DeltaCredit is forming ROSBANK Group (hereinafter — the Group).

Key rating assessment factors 

A very high probability of the Bank obtaining extraordinary support from its shareholder. In case of necessity, SG Group represented by its parent bank Societe Generale S.A. (hereinafter — supporting organization, SO) is ready to provide to ROSBANK both short-term and long-term financing, as well as to infuse capital for the reasons stated below:

  • The Russian market is deemed strategically important for SG Group.
  • Operational integration in place (e.g. the Bank being a part of the SG Group’s corporate investment platform).
  • The Bank’s potential default can entail substantial operational and financial risks for the SG Group. 

The final assessment of a country risk of the foreign supporting organization (domiciled in France) presence jurisdiction against the RF country risk and the supporting organization’s creditworthiness assessment are defined by the Agency as strong, and the Bank’s level of connection to a shareholder is assessed as a very strong. In view of this, the Bank’s credit rating is defined as being on par with the Russian Federation.

Strong business profile. Given the Group’s comprehensive activities, its diversification of operating income before provisions is assessed as high (the Herfindahl-Hirschman index is at the level of no more than 0.2). The 2017 strategy is generally considered to be in line with the current macroeconomic tendencies, and assessed by ACRA as adequate and feasible. The management quality at ROSBANK is defined as the highest, given the top management’s long-term successful working experience and the fact that Societe Generale S.A. is executing complete control over the Bank’ operating activities and over the Group engaged in the business in the Russian Federation territory. 

A material loss absorption cushion rests on the Bank’s and the Group’s own capital standing high by both the regulatory norms (N1.2 and N1.1 equaled 9.8% on April 1, 2017, the Group’s N20.2 and N20.1 equaled 9.7% on January 1, 2017) and the Basel standards (the Group’s Tier-1 was 15.8% at end-2016), which allows the Group to sustain a more than 500 bps increase in credit risk, while the relatively low averaged capital generation ratio (ACGR) of 42 bps shown over the past five years can be mostly put down to the Group’s loss-making activities in 2015. 

Adequate risk profile assessment is based on the Group's risk management system quality, which is characterized by transparency and independency in intragroup decision-making, as well as by regular improvement on its stress methods, carrying out of stress tests and assessment of the current operating environment. The Group’s loan portfolio quality (67% of assets) is assessed as satisfactory, with the share of problem and potentially problem loans being at an adequate level  — 10.8% of portfolio, while NPL90+ stood at 9.1%. In ACRA’s opinion, the concentration on the largest borrowers (14.8% of the portfolio), high-risk industries (8% of loans) and related parties (46% of Tier-1) is low.

Strong liquidity position is based on high volume of liquid and highly liquid assets that provide an adequate coverage of potential outflows (over the past six months, the short-term liquidity indicator has been consistently exceeding 90%).

Balanced funding profile. The Group’s funds are typically raised from clients (61% of its liabilities) mostly on a short-term basis. It should be noted that there is no substantial concentration on the largest borrowers (the top 10 comprise 13.9% of resource base). The Group is also actively involved in debt placement (21% of resource base), not more than RUB44 bln (some 5% of assets) redemptions are expected in the next 12 months. 

Key assumptions

  • Continued SG Group control over the Bank operations.
  • Cost of credit risk is within 200 pps.
  • Tier-1 capital adequacy (N1.2) above 9% within the 12 to 18-month horizon.

Potential outlook or rating change factors

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A negative rating action may be prompted by:

  • A decline in shareholders’ willingness to support the Bank.
  • A significant supporting organization’s own creditworthiness deterioration.

Rating components

SCA: aa.

Adjustments: none.

Support: on par with the RF.

Issue ratings

No outstanding issues have been rated.

Regulatory disclosure

The credit rating has been assigned under the national scale for the Russian Federation and is based on the Methodology for Credit Ratings Assignment to Banks and Bank Groups Under the National Scale for the Russian Federation, Methodology for Analyzing Relationships Between Rated Entities and Supporting Organizations outside the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.

The credit rating has been assigned to PJSC ROSBANK for the first time. The credit rating and its outlook are expected to be revised within one year following the rating action (April 25, 2017).

Disclosure of deviations from the approved methodologies. Neither the short-term, nor the long-term liquidity shortage indicators (STLSI and LTLSI, respectively) were calculated in the course of rating assignment, as the assessment of PJSC ROSBANK’s liquidity position was based on its statements drawn up in compliance with Forms 0409122 and 0409125.

The assigned credit rating is based on the data provided by PJSC ROSBANK, information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using the consolidated IFRS statements of PJSC ROSBANK and the standalone financial statements of PJSC ROSBANK, drawn up in compliance with the Bank of Russia Ordinance No. 4212-U of November 24, 2016. The credit rating is solicited, and PJSC ROSBANK participated in its assignment.

No material discrepancies between the provided information and the data officially disclosed by PJSC ROSBANK in its financial statements have been discovered.

ACRA provided an additional service to PJSC ROSBANK in the form of informational support (a practical seminar). No conflicts of interest were discovered in the course of credit rating assignment.

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