The credit rating of Center-invest Bank (hereinafter, Center-invest Bank, or the Bank) is based on an adequate business profile, strong capital adequacy position, adequate risk profile assessment, and adequate assessment of liquidity and funding position. The Bank has a moderately high level of creditworthiness compared to other credit institutions in the Russian Federation.

Center-invest Bank is a regional bank with organic business expansion, ranking 71st in terms of capital among Russian banks. The Southern Federal District is the key operation area of the Bank. Center-invest Bank specializes in consumer, especially mortgage, lending, and SME lending and issuing guarantees, and provides leasing services through its wholly owned subsidiary LLC Center-leasing. The largest shareholders of the Bank include European Bank for Reconstruction and Development (19.7%), German investment corporation DEG (16.1%), as well as founders Mr Vasily Vysokov and Mrs Tatiana Vysokova (24.4%).

Key rating assessment factors

The adequate business profile (bbb) is determined by the Bank's stable position in the key operation area, both in lending and in attracting client funds. Center-invest Bank’s strategy appears well balanced and takes into account current trends of the Russian banking system development while the quality of the Bank’s corporate governance is assessed as high. The Bank’s business profile assessment is supported by the consistently high diversification of its operating income (as of the end of 2019, the Herfindahl-Hirschman Index was 0.19).

The Bank’s substantial capital cushion stems from retaining the loss absorption buffer in terms of accepted balance and off-balance sheet risks by both regulatory norms (N1.2 equaled 9.7% on June 1, 2020) and Basel standards (Tier-1 ratio was 16.8% on December 31, 2019), which allows Center-invest Bank to sustain an increase in credit risk up to 500 bps without the need for any external financial support. At the same time, the Bank’s ability to generate capital is assessed as adequate (the average capital generation ratio, ACGR, totaled about 90 bps for the past five years). The Bank’s operating efficiency indicators correspond to the market median; net interest margin, NIM, has averaged close to 6% over the past three years, while cost-to income ratio, CTI, before provisions has equaled 48%.

The adequate risk profile assessment is determined by an adequate risk management system as well as acceptable loan portfolio quality (74% of assets as of March 31, 2020). The share of problem loans equals 8.9% of the total portfolio (including 6.8% of NPL90+, 0.5% of restructured loans, and 1.6% of potentially problem, in ACRA's opinion, loans). The portfolio concentration on the top 10 groups of borrowers (7.2% of the portfolio), high-risk industries (13% of Tier 1 capital), and related parties (1% of Tier 1 capital) is insignificant. The share of non-core assets owned by the Bank has grown to 11% of Tier 1 capital after the Bank has successfully enforced certain collateral. Due to a strictly conservative approach, a significant part of the Bank’s temporarily free liquidity is deposited with the Bank of Russia. Center-invest Bank does not deal in securities, and the share of assets and liabilities denominated in foreign currencies is extremely low.

The adequate liquidity and funding position is based on a sufficient amount of high-liquid assets for covering potential outflows. Therefore, the short-term liquidity shortage indicator, STLSI, is fulfilled with a surplus in ACRA's base case scenario and demonstrates a slight shortage (2.4% of liabilities) in the stress scenario. There are no substantial imbalances within longer-term horizons and no large-scale repayments are expected within the next 12-18 months.

The pronounced dependence of the Bank’s resource base on funds of individuals (76% of liabilities) is somewhat offset by a low concentration on the top 10 groups of clients (5.7% of liabilities). The Bank does not raise funds from the regulator.

Key assumptions

  • Adhering to the Bank's current business model within the 12 to 18-month horizon;
  • Loan portfolio growth rate not exceeding 5% in 2020;
  • Cost of credit risk within 2%;
  • Tier-1 capital adequacy over 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 positive rating action may be prompted by:

  • Material decline in the share of problem loans in the loan portfolio;
  • Significant decrease in resource base concentration on the largest source.

A negative rating action may be prompted by:

  • Decrease of capital adequacy prompted by a growth in the cost of risk or dividend payments;
  • Increase in the share of problem loans in the loan portfolio and/or growth in the volume of non-core assets owned by the Bank;
  • Deterioration of the liquidity position.

Rating components

Standalone creditworthiness assessment (SCA): a.

Adjustments: none.

Support: no systemic importance.

Issue ratings

Center-invest Bank, Certified exchange-traded interest-bearing non-convertible unregistered bond, BO-001Р-05 series (RU000A0ZZKP5), maturity date: March 3, 2022, issue volume: RUB 600 mln — А(RU).

Credit rating rationale. The issue represents senior unsecured debt of Center-invest Bank. Due to the absence of either structural or contractual subordination of the issue, ACRA regards it as pari passu to other existing and future unsecured and unsubordinated debt obligations of the Bank in terms of priority. According to ACRA’s methodology, the credit rating of the issue is equivalent to that of Center-invest Bank, i.e. A(RU).

Regulatory disclosure

The credit ratings of Center-invest Bank and the bond (ISIN RU000A0ZZKP5) issued by Center-invest Bank were 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, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities. To assign a credit rating to the bond issue mentioned above, the Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments under the National Scale of the Russian Federation was also used.

The credit ratings of Center-invest Bank and the bond (ISIN RU000A0ZZKP5) issued by Center-invest Bank were published for the first time by ACRA on July 26, 2018 and September 5, 2018, respectively. The credit rating and outlook of Center-invest Bank and the credit rating of the bond (ISIN RU000A0ZZKP5) issued by Center-invest Bank are expected to be revised within one year following the publication date of this press release.

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

No material discrepancies between the provided data and the data officially disclosed by Center-invest Bank in its financial statements were discovered.

ACRA provided additional services to Center-invest Bank. No conflicts of interest were discovered in the course of credit rating process.

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Ivan Pestrikov
Expert, Financial Institutions Ratings Group
+7 (495) 139 04 80, ext. 135
Svetlana Gromova
Expert, Financial Institutions Ratings Group
+7 (495) 139 04 80, ext. 221
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