The credit rating of AO UniCredit Bank (hereinafter – UniCredit Bank, the Bank) is determined by a very high likelihood of receiving extraordinary support from the parent bank marked by high creditworthiness. UniCredit’s standalone creditworthiness assessment (SCA) is also high due to a combination of its strong market position, solid loss absorption buffer, and adequate risk profile.

UniCredit Bank is a systemically important bank, which is 100%-owned by UniCredit S.p.A (Italy). The Bank occupies leading positions in terms of assets and capital in the Russian banking sector (it is among the top 10 largest banking groups). UniCredit Bank operates a wide branch network scattered across six RF federal districts with a focus on Moscow, as well as a representative office in the Republic of Belarus.

Very high likelihood of shareholder extraordinary support. If necessary, UniCredit Group via its parent bank structure UniCredit S.p.A. (hereinafter – supporting organization, SO) is ready to provide the Bank with both, short-term and long-term financing, and replenish its capital due to:

  • Strategic importance of the Russian market for UniCredit Group;
  • Pronounced operating integration (SO exerts strategic and partially operating control over the Bank, being a part of a corporate investment business platform of UniCredit Group);
  • Significant operating, financial and reputational risks arising in the event of the Bank’s potential default.

The final assessment of country risk of the Group’s jurisdiction of presence against Russia's country risk is defined by ACRA as generally strong, the assessment of SO’s creditworthiness – as moderately strong, the degree of relationships between the Bank and its shareholder – as very strong. Consequently, UniCredit Bank’s credit rating is defined by adding five additional notches to its SCA.

Strong business profile. Due to rather universal nature of the Bank's activities, diversification of its operating income is assessed as moderately high (the Herfindahl-Hirschman index is 0.25). UniCredit Bank's strategy for 2017 is generally in line with current macroeconomic trends, and is defined by ACRA as adequate. High assessment of the Bank’s management quality is manifested by successful long-term experience of its top managers both, in Russia and abroad, coupled with control over the Bank’s activities on the part of UniCredit S.p.A.

A significant loss absorption buffer rests upon The Bank’s high own capital level by both, Russian regulatory requirements (N1.2 and N1.1 amounted to 13.7% as of May 1, 2017) and international standards (Tier-1 equaled 17.2% as of April 1, 2017), which allows the Bank to withstand a significant (over 500 bps) growth of credit risk without notable regulatory consequences. Moreover, UniCredit Bank is marked by stable profitability regardless of a phase of an economic cycle, which, coupled with a conservative dividend strategy, conditions rather strong capital generation within the last five years (the Bank’s averaged capital generation ratio, ACGR, amounts to 165 bps).

Adequate risk profile assessment is based on UniCredit Bank’s high-quality risk management system, manifested through transparency and independence in internal decision-making, regularly streamlined risk policies, as well as stress testing of capital adequacy, liquidity, and market risk indicators. The Bank’s loan portfolio (54% of assets) quality is defined as satisfactory due to an acceptable level of problem and potentially problem loans amounting to 10.1% of loan portfolio (of which 7% is attributed to NPL90+, and 3.1% is represented by restructured loans). Loan portfolio concentration on 10 largest groups of borrowers remains moderate (26%), while concentration thereof on industries bearing high risks is low (25% of core capital).

Strong liquidity position is defined by a large amount of liquid and highly liquid assets, which translates into sufficient coverage of potential outflows with highly liquid assets (over the past six months, the short-term liquidity ratio averaged 116%).

Satisfactory funding profile. The main share of UniCredit Bank’s resource base is formed by corporate deposits (68% of liabilities), mostly raised on a fixed-term basis. Approximately 41% of the Bank’s liabilities (over RUB 400 bln) is constituted by funds from ten largest depositors (creditors). UniCredit Bank does not raise funds from the regulator.

Key assumptions

  • Retaining shareholder, strategic, and operational control on the part of UniCredit Group;
  • Credit risk cost not exceeding 200 bps;
  • Tier-1 capital adequacy (N1.2) over 11% on 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:

  • Negative changes in UniCredit Group’s propensity to support the Bank;
  • Material aggravation of SO’s creditworthiness.

Rating components

SCA: aa+.

Adjustments: none.

Support: SCA + 5 notches.

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.

A credit rating has been assigned to AO UniCredit Bank for the first time. The credit rating and its outlook are expected to be revised within one year following the rating action date (June 23, 2017).

Disclosure of deviations from approved methodologies. The LTLSI and LTLSI indicators were not calculated, the liquidity factor assessment was performed by ACRA on the basis of statements drawn up by AO UniCredit Bank in compliance with forms 0409122 and 0409125. ACRA assessed the funding and liquidity factor one notch higher since the risk of low diversification of liabilities arising from a high proportion of corporate funds has already been taken into account while assessing concentration on largest creditors’/depositors’ funds.

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

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

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

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Analysts

Suren Asaturov
Associate Director, Financial Institutions Ratings Group
+7 (495) 139 04 80, ext. 130
Mikhail Polukhin
Director, Financial Institutions Ratings Group
+7 (495) 139 03 47
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