ACRA assigns AAA(RU) to Sberbank, outlook Stable

The credit rating of Sberbank (hereinafter – Sberbank, or the Bank) is based on its very high systemic importance for the Russian economy and a high degree of state influence, as defined by the ACRA methodology. The Bank enjoys high standalone creditworthiness compared to other Russian credit institutions, which is supported by its exceptional market positions, adequate capital position and adequate risk profile. Funding profile and liquidity position are neutral factors for standalone creditworthiness of the Bank.

Sberbank is the largest Russian bank, accounting for 30% of country’s banking assets. A leader in most of domestic banking business segments, Sberbank also has a full-fledged network of subsidiaries, branches and representative offices spread across the CIS, Central and Eastern Europe, Turkey, the UK, and the US. The main shareholder of the Bank is the Bank of Russia, which holds 50% plus one voting share of its charter capital.

Key rating assessment factors

Very high likelihood of the Bank getting extraordinary government support. As a key player on the market of strategical importance for the Russian authorities, Sberbank boasts very high systemic importance (according to the Methodology for Analyzing Relationships Between Rated Entities and the State). This is reflected in potential consequences of its default, which may bring a systemic banking crisis and result in significant problems across the entire economy. Sberbank is a dominant creditor of the population and business (with a market share of 34%), a holder of approximately 47% of retail deposits (an indisputable leader, considerably ahead of the rest of the Russian banks), and a critical infrastructural entity acting as a settlement system for the government. Therefore, its default may lead to an acute socioeconomic crisis and recession. In addition, thanks to a unique market position, the Bank is de facto regarded by other credit institutions as a benchmark in terms of direction and pace of interest rate changes.

Very strong business profile. The Bank has a stable franchise and enjoys largest market shares in most of the banking business segments. Its key competitive advantages are: a substantial amount (55% of total liabilities as of end-2016, which is slightly less than half of the total amount of funds in the banking system) of relatively cheap retail deposits (around 30% of retail funds on demand and for the term of under 1 month), which allows the Bank to sustain high net interest income (average 3-year NIM stands at 5.2%, exceeding the peer sample level); wide customer base coverage on both the geographical and industry basis, which provides for good operating income diversification (with some skew in favor of interest income from corporate loans); significant investments in the most advanced customer service and information processing technologies, which should stimulate an increase in the proportion of fee and commission income in the medium term. Sberbank’s management quality is assessed as high in the context of the Russian banking sector.

Adequate capital adequacy assessment. The business model of the Bank has shown consistently high capital generation levels (134 bps on average over the past 5 years, including the period of economic downturn). Coupled with a conservative capital adequacy management policy and a moderate growth strategy, this provides Sberbank with a comfortable loss absorption buffer (core capital adequacy equaled 12.3% at end-2016). By ACRA’s estimates, the Bank is able to withstand an additional increase in the cost of risk of up to 300 bps without a decline in regulatory core capital adequacy (N1.2) below 6% on the 12 to 18-month horizon.

Adequate risk profile position is marked by a moderate level of non-performing loans (the portion of NPL90+ and forcibly restructured loans made up 9.3% of the Bank’s total loan portfolio as of end-December 2016). Risk profile assessment is limited by the significant volume of claims classified as specialized lending and identified as bearing high risk under ACRA’s methodology (1.36x of core capital). The Bank’s risk profile is characterized by a high quality and technologically developed system of risk management both on operating and strategic levels.

Comfortable liquidity position is expressed in sufficient coverage of potential outflows by highly liquid assets (short-term liquidity indicator, STLI, was is the range of 84–260% in 4Q2016). If it should be necessary, the Bank has an access to the considerable amount of regulatory (REPO and 312-P operations), market and government (including by funds of the Federal Treasury) instruments. Sberbank’s funding structure is assessed as well-balanced, with moderate concentration both on largest creditors (as of end-December 2016, the share of 20 largest creditor groups equaled to 12.8% of the total client funds with the Bank) as well as on the funding sources on the whole. We do not expect any significant changes in the funding structure within 12 to 18-month horizon.

Key assumptions

  • Retaining the Bank of Russia's shareholder control over the Bank;
  • Cost of credit risk not exceeding 2%;
  • Dividend payout not exceeding 25% of net income under the ACRA stress scenario;
  • Tier-1 capital adequacy higher than 11% 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:

  • Loss of the Bank of Russia’s shareholder or operating control with a simultaneous decrease of the Bank’s standalone creditworthiness.

Rating components

Standalone creditworthiness assessment (SCA): aaa.

Adjustments: on par with the Russian Federation.

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, the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities, and the Methodology for Analyzing Relationships Between Rated Entities and the State.

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 Sberbank’s liquidity position was based on its statements drawn up in compliance with Forms 0409122 and 0409125.

A credit rating has been assigned to Sberbank for the first time. The credit rating and its outlook are expected to be revised within one year following the rating action (March 16, 2017).

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

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

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

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