The A-(RU) credit rating assigned to JSC «Post Bank» (hereinafter, Post Bank, Bank) is due to the Bank's satisfactory business profile, capital adequacy, risk profile, and funding and liquidity. The Bank's competitive advantage has been taken into account by adding one notch to the standalone creditworthiness assessment (SCA). In addition, ACRA has taken into account the likelihood of extraordinary support to the Bank from its beneficiaries, which is expressed in three notches up to the SCA.
Post Bank is a large Russian bank (23rd in assets and 18th in capital as of November 1, 2021) whose business is focused on financial services to individuals.
Key assessment factors
The Bank is highly likely to receive extraordinary support from shareholders in case of need. The Agency has taken into account the propensity of shareholders to provide support to the Bank. The high likelihood of extraordinary support is also determined by ACRA's assessment of the creditworthiness of the Bank’s shareholders, which, in the Agency's opinion, is strong.
ACRA's opinion on the level of support from the controlling owners is expressed in three notches added to the Bank's SCA.
Satisfactory business profile (bbb-) is determined mostly by the strong position of Post Bank in the banking services market and the low diversification of its sources of operating income. Post Bank is one of the ten largest Russian banks in terms of loans granted to individuals and ranks 11th in terms of retail funds held on accounts. The Bank is also the leader in the POS loans market. The Bank's strategy is focused on financial services to individuals, while the bulk of the Bank's operations is carried out through the network of branches of Russian Post. The emphasis on transactions with individuals determines the low diversification of operating income (the Herfindahl-Hirschman Index exceeds 0.43x). The Bank's development strategy is generally in line with the macroeconomic situation, which makes it possible to assess the strategy as satisfactory. The quality of management matches the scale and complexity of the Bank's operations.
ACRA assesses the Bank's capital adequacy as satisfactory. As of November 1, 2021, the N1.2 ratio was 10.02%; over the past 12 months, this ratio averaged to 9.3%. The Agency expects the N1.2 ratio to show a moderate decline over the next 12 months. The Bank demonstrates a medium capacity to generate capital. For the period from 2017 to October 1, 2021, the average capital generation ratio (ACGR) amounted to 71 bps. The factor holding back the profitability of Post Bank's operations is a relatively high Cost-To-Income (CTI), which amounted to 54.1% over the past three years. ACRA notes that the Net Interest Margin (NIM) declined below 10% in this period. The current level of capitalization and the existing high coverage of bad debts by reserves allows Post Bank to withstand the increase in the cost of credit risk in the range of 300–500 bps, as confirmed by a stress test carried out in accordance with ACRA's methodology.
The Bank's risk profile is satisfactory, which is determined by a medium quality of the loan portfolio and a high coverage. In addition, the focus of the Bank's strategy on unsecured lending has a negative impact on the risk profile. Stage 3 loans formed about 13% of the portfolio as of September 30, 2021. The coverage of these loans by provisions exceeded 97%, while the ratio of all provisions to Stage 3 loans exceeded 137%. A positive factor for the quality of the loan portfolio include its high granularity (the share of loans granted to the ten largest borrowers is less than 0.1% of loans). Taking into account the high level of automation in making loan decisions, ACRA assesses the quality of the Bank's risk management as satisfactory.
ACRA assesses the position of Post Bank in funding and liquidity as satisfactory. The Agency notes that the Bank has a short-term liquidity shortage in both the base case and stress scenarios. There is also an imbalance of assets and liabilities by maturity (the long-term liquidity shortage indicator (LTLSI) is 51%). At the same time, the Agency takes into account that the Bank's resource base includes mainly current funds of retail clients, as well as relatively stable deposits, the amount of which does not exceed the insurance coverage offered by the Deposit Insurance Agency.
ACRA notes a high dependence of the Bank's resource base on retail accounts (over 90% of liabilities), which in turn determines a low dependence on funds from the largest creditors (depositors). As of September 30, 2021, the share of ten largest depositors was less than 0.5% of liabilities.
The Agency has adjusted the Bank's SCA one notch up, taking into account the competitive advantage, i.e. the ability to offer services through the network of Russian Post branches. More than 20 thousand Post Bank points of sale operate in Russian Post offices, which provides the Bank with access to a large base of potential customers and contributes to the growth of its geographical diversification.
Maintaining the shareholding profile and the business model in the next 12–18 months;
N1.2 CAR above 8% in the next 12–18 months;
Maintaining the low concentration of the loan portfolio and client finds.
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:
Lower CTI and higher NIM;
Higher capital generation capacity.
A negative rating action may be prompted by:
Declining importance of the Bank for the key shareholders;
Declining granularity of the loan portfolio.
Adjustments: competitive advantage — one notch up to SCA.
Support: three notches up to SCA.
No outstanding issues have been rated.
The credit rating has 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 Rated Entities Associated with a State or a Group, and the Key Concepts Used by Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of JSC «Post Bank» was published by ACRA for the first time on December 20, 2020. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on the data provided by JSC «Post Bank», information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using the IFRS statements of JSC «Post Bank» and the financial statements of JSC «Post Bank» drawn up in compliance with the Bank of Russia's Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited, and JSC «Post Bank» participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided ancillary services to JSC «Post Bank». No conflicts of interest were identified in the course of credit rating assignment.