ACRA affirms AAA(RU) to PJSC ROSBANK, outlook Stable, and affirms AAA(RU) to its bonds

ACRA affirms the credit rating of PJSC ROSBANK (hereinafter, the Bank) at AAA(RU), outlook Stable, and affirms the credit ratings of the bonds issued by the Bank (ISIN RU000A100220, RU000A0JXUH0, RU000A0ZYH44, RU000A100B16, RU000A0ZYBG6, RU000A100TH9) at AAA(RU).

The credit rating of the Bank is based on a high standalone creditworthiness assessment (SCA) and a very high probability of extraordinary support from its parent bank, which boasts a high level of creditworthiness. The Bank’s SCA at aa+ reflects comfortable levels of capital adequacy, an adequate risk profile, and adequate liquidity and funding positions.

The Bank is a systemically important universal bank holding leading positions in the Russian banking sector in terms of assets and capital and operating in all federal districts of the Russian Federation. The Bank is a 99.95%-owned subsidiary of Societe Generale S.A., which is headquartered in France (a parent bank of the international financial group Societe Generale, hereinafter, SG Group). The Bank forms ROSBANK Group (hereinafter, the Group) together with its 100% subsidiary Limited Liability Company Rusfinance Bank and other subsidiaries, mostly financial institutions. The merger between the Bank and JSC Commercial Bank DeltaCredit was completed in Q2 2019.

Key rating assessment factors

Very high probability of extraordinary support from the shareholder. If necessary, SG Group, represented by its parent entity Societe Generale S.A. (hereinafter, the Supporting Organization, or SO), is willing to provide the Bank with both short-term and long-term financing, as well as infuse capital. This is based on the following:

  • The Russian market is strategically important for SG Group;
  • Pronounced operational integration (e.g. the Bank is a part of SG Group’s corporate and investment platform);
  •  The Bank’s theoretical default would entail substantial operational and financial risks for SG Group.

The final assessment of the country risk of the foreign supporting organization’s jurisdiction (France) against the country risk of Russia and the supporting organization’s creditworthiness assessment are defined by ACRA as strong, with the Bank’s connection with the shareholder assessed as a very strong. In view of the above, the credit rating of the Bank is determined as on par with the Russian Federation.

Strong business profile. Given the Group’s universal nature, the diversification of its operating income before provisions is assessed as high, with the Herfindahl-Hirschman index standing at 0.14 for 2019. The 2020 strategy is generally considered to be in line with current macroeconomic trends and is assessed by ACRA as adequate. ACRA gives the management quality at the Bank the highest assessment given the many years of the top management’s successful work experience and the fact that SG Group exercises full control over the Bank’s operating activities and over the Group operating in the Russian Federation as a whole.

The Bank’s strong capital adequacy assessment is due to a Tier-1 capital adequacy ratio at 19.1% for 2019 given that regulatory capital adequacy ratios are maintained at a high level (N1.2 and N20.2 totaled 10.3% and 10.9%, respectively, as of January 1, 2020), which allows the Bank to sustain a more than 500 bps increase in credit risk. The low averaged capital generation ratio also shows a tendency towards growth, although its value (66 bps over the past five years) is still affected by the Group’s loss-making activities in 2015. Operating efficiency is acceptable.

The adequate risk profile assessment is based on the Group’s risk management system quality, which is characterized by transparency and independence in intragroup decision-making as well as by regular improvement of its stress methods, performance of stress tests, and the assessment of the current operating environment. As of the end of 2019, the Group’s loan portfolio quality (63% of assets) was characterized by a low level of problem and potentially problem loans, which does not exceed 5% (including NPL90+ at 4%). Concentration on the top ten groups of borrowers (nearly 11% of the portfolio) and high-risk industries (construction and real estate industry accounts for 3% of Tier-1 capital) is sufficiently low.

The Bank’s adequate liquidity position is based, in ACRA’s opinion, on the Group’s high capacity to fulfill its obligations within a 90-day window based on a short-term liquidity surplus in the base case scenario and a small deficit in the stress scenario. A high short-term liquidity indicator averaging around 150% over the last 12 months confirms this. In addition, there are no imbalances in longer-term periods (the long-term liquidity shortage indicator is adequate at around 80%).

Well-balanced funding profile. The Group’s funds are typically raised from clients (78% of liabilities as of the end of 2019) mostly on a term basis. At the same time, there is no resource base concentration on the largest creditors (the top 10 creditors account for around 15% of the resource base). The Group is also actively involved in debt placement (10% of the resource base). Redemption of a significant volume of liabilities is not expected in the next 12 months.

Key assumptions

  • SG Group maintaining shareholder and operational control;
  • Cost of credit risk at or below 100 bps;
  • Maintaining 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:

  • Shareholders being less willing to support the Bank;
  • Substantial deterioration in the SO’s creditworthiness.

Rating components

SCA: аа+.

Adjustments: none.

Support: on par with the Russian Federation.

Issue ratings

PJSC ROSBANK, BО-002R-04 (RU000A100220); maturity date: January 31, 2022, issue volume: RUB 10,000,000,000 — ААА(RU);

PJSC ROSBANK, BО-002R-02 (RU000A0JXUH0); maturity date: June 30, 2020, issue volume: RUB 2,816,431,000 — ААА(RU);

PJSC ROSBANK, BО-002R-03 (RU000A0ZYH44); maturity date: December 2, 2022, issue volume RUB 3,000,000,000 — ААА(RU).

PJSC ROSBANK, BО-002R-05 (RU000A100B16), maturity date: April 27, 2021, issue volume: RUB 10,000,000,000 — ААА(RU);

PJSC ROSBANK, BО-001R-01 (RU000A0ZYBG6), maturity date: September 30, 2020, issue volume: RUB 7,000,000,000 — ААА(RU);

PJSC ROSBANK, BО-002R-06 (RU000A100TH9), maturity date: March 16, 2023, issue volume: RUB 15,000,000,000 — ААА(RU).

Rationale. The issues represent senior unsecured debt of ROSBANK. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them as pari passu to other existing and future unsecured and unsubordinated debt obligations of the Bank. According to ACRA’s methodology, the credit rating of the issues is equivalent to that of PJSC ROSBANK, i.e. AAA(RU).

Regulatory disclosure

The credit ratings of PJSC ROSBANK and bonds (RU000A100220, RU000A0JXUH0, RU000A0ZYH44,  RU000A100B16, RU000A0ZYBG6, RU000A100TH9) issued by PJSC ROSBANK have been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Banks and Bank Groups under the National Scale for the Russian Federation, the 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 Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments Under the National Scale of the Russian Federation was also used in the process of the credit rating assignment.

The credit rating of PJSC ROSBANK and credit ratings of the bonds (RU000A100220, RU000A0JXUH0, RU000A0ZYH44, RU000A100B16, RU000A0ZYBG6, RU000A100TH9) issued by PJSC ROSBANK were published by ACRA for the first time on April 27, 2017, January 28, 2019, June 30, 2017, November 28, 2017, April 26, 2019, June 6, 2019, and September 12, 2019, respectively. The credit rating of PJSC ROSBANK and its outlook as well as the credit ratings of the bonds (RU000A100220, RU000A0JXUH0, RU000A0ZYH44, RU000A100B16, RU000A0ZYBG6, RU000A100TH9) are expected to be revised within one year following the publication date of this press release.

The credit ratings are based on data provided by PJSC ROSBANK, information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using IFRS consolidated statements of ROSBANK Group and statements of PJSC ROSBANK composed in compliance with the Bank of Russia Ordinance No. 4927-U, dated October 8, 2018. The credit ratings are solicited, and PJSC ROSBANK participated in their assignment.

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

ACRA provided additional services to PJSC ROSBANK. No conflicts of interest were discovered in the course of credit rating assignment.

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