The credit rating of LLC CB «GT BANK» (hereinafter, GT Bank, or the Bank) is based on the Bank’s moderately low business profile assessment, strong capital adequacy, critical risk profile assessment, and adequate liquidity and funding position.

GT Bank is a small credit institution that operates mainly in the Krasnodar Krai. The Bank’s core activities are corporate lending, in particular to companies providing utilities services, and raising funds from individuals. As of April 1, 2022, the Bank ranked 160th in terms of equity among Russian banks.

KEY ASSESSMENT FACTORS

The moderately low business profile assessment (bb-) reflects the Bank’s relatively low share in the Russian financial services market (it ranked 203rd in terms of assets as of February 1, 2022). At the regional level, however, the Bank holds adequate market positions and has a stable base of borrowers and depositors.

ACRA assesses the Bank’s business diversification as low. Operating income comes mainly from interest revenues on loans issued to clients (82% of operating income). According to ACRA’s calculations, the Herfindahl–Hirschman index stood at 0.4 as of January 1, 2022.

GT Bank’s strategy provides for growth of its loan portfolio, resource base, and capital. In terms of active operations, the Bank intends to retain its focus on corporate lending. The Bank also intends to develop its line of commission products for legal entities in order to increase non-interest revenues and further diversify the structure of its liabilities.

ACRA assesses the Bank’s capital adequacy as strong. As of January 1, 2022, the Bank maintained its capital adequacy with reserves (N1.1 and N1.2 stood at 27.97%). This allows the Bank to withstand an increase in the cost of risk higher than 500 bps without violating the N1.2 ratio.

The Bank has posted positive financial results over an extensive period of time. In 2021, after-tax profits amounted to RUB 150 mln compared to RUB 101 mln in 2020. These results were achieved largely due to the growth of net interest income and a significant decline in annual operating expenses. However, the Bank’s average operating performance over the past three years has remained at about the same level as a year ago. For 2019–2021, the net interest margin (NIM) was 6% compared to 5.6% for 2018–2020, while the cost-to-income ratio (CTI) was 82.2%. The averaged capital generation ratio (ACGR) for 2017–2021 was 117 bps.

ACRA retains its critical assessment of the Bank’s risk profile. The Agency’s calculations show that the share of problem and potentially problem loans at the Bank amounted to 22.6% in 2021 (including NPL90+ at 9.3%), which is higher than both the industry average and the indicator for a number of peer banks with a similar scope and operating profile. ACRA notes that the concentration of the loan portfolio on the ten largest groups of borrowers has declined substantially — from 75.1% to 58.9%. However, this indicator is still high, and it bears increased credit risks in the current deteriorating operating environment.

Adequate funding and liquidity position. As of January 1, 2022, the Bank was able to withstand a substantial outflow of client funds both in ACRA’s base case (short-term liquidity shortage indicator was RUB 1.2 bln) and stress scenarios (short-term liquidity shortage indicator was 2.6% of liabilities). Long-term liquidity is assessed as strong — the long-term liquidity shortage indicator (LTLSI) was around 113%.

The diversification of funding sources is assessed as moderate. The Bank’s main funding source is funds from individuals (65.5% of liabilities as of January 1, 2022). As of the end of 2021, the share of the largest group of creditors amounted to 16.9% of liabilities, while the share of funds of the ten largest depositors was 32.9%, and the annual averages for these indicators were 5.3% and 11.4%, respectively.

key assumptions

  • Maintaining the current strategy and business model within the 12 to 18-month horizon;

  • Maintaining N1.2 above 12% within the 12 to 18-month horizon;

  • Cost of credit risk at 3–4%.

potential outlook or rating change factors

The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Declining level of problem loans;

  • Further decline of the concentration of the loan portfolio on the ten largest groups of borrowers;

  • Lower dependence on the main source of funding and maintaining the low concentration of the resource base.

A negative rating action may be prompted by:

  • N1.2 falling below 12%;

  • Deterioration in liquidity position;

  • Increased dependence on funds from the largest creditors (depositors).

rating components

Standalone creditworthiness assessment (SCA): bb-.

Adjustments: none.

Support: none.

issue ratings

There are no outstanding issues.

regulatory disclosure

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 and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.

The credit rating of LLC CB «GT BANK» was published by ACRA for the first time on May 17, 2019. 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 data provided by LLC CB «GT BANK», information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS financial statements of LLC CB «GT BANK» and the financial statements of LLC CB «GT BANK» drawn up in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited, and LLC CB «GT 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 no additional services to LLC CB
«GT BANK». No conflicts of interest were discovered in the course of credit
rating assignment.
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