The credit rating of Joint Stock Commercial Mortgage Bank AKIBANK (Public Joint Stock Company) (hereinafter, AKIBANK, or the Bank) is based on the moderately low assessment of the business profile, strong capital adequacy position, low risk profile assessment, and the adequate funding and liquidity position.

AKIBANK is a regional credit institution focused on providing financial services mostly in the Republic of Tatarstan. As of February 1, 2022, the Bank ranked 130th in assets among Russian banks, and fourth in assets among banks in Tatarstan. The Bank is headquartered in Naberezhnye Chelny.

Key assessment factors

The bb assessment of the Bank’s business profile reflects its relatively low positions in Russia’s financial services market (the Bank ranked 113th in capital as of February 1, 2022) and the medium diversification of operating income (around 50% of total revenue is interest income from corporate loans). ACRA notes the limited transparency of the Bank’s ownership structure with a significant amount of shareholder capital belonging to the senior managers of the Bank.

ACRA maintains its strong assessment of the Bank’s capital adequacy. As of February 1, 2022, the Bank’s N1.2 ratio stood at 23.9%, and it has not changed significantly after that date. ACRA’s stress test indicates that the Bank’s loss absorption buffer allows it to withstand an increase in the cost of credit risk significantly higher than 500 bps. ACRA notes that the Bank’s ability to generate capital has improved due to a growth in the volume of profits: in 2017–2021, the averaged capital generation ratio amounted to 109 bps (84 bps in 2016–2020). The cost-to-income (CTI) ratio average for 2019–2021 became lower than 75%, however ACRA notes that this ratio has been growing over the past two years. The Bank shows a relatively high operating margin with its net interest margin (NIM) averaging 6.0% in 2019–2021.

ACRA maintains its low assessment of the Bank’s risk profile, which is mainly due to the high concentration of the loan portfolio. As of December 31, 2021, the share of loans provided to the ten largest groups of borrowers exceeded 50%, having increased since 2020. The total share of IFRS 9 Stage 3 loans has declined to about 8% of the loan book against 11.4% as of December 31, 2020. Reserve coverage on these loans is close to 100%. The volume of corporate loans has expanded over the past year, although its further growth will be constrained by crisis events in the economy. We also do not exclude that the share of non-performing loans will grow, which, given the high concentration, may have an impressive effect on the standalone creditworthiness assessment. ACRA notes that in 2021, when the portfolio of securities lost some weight and capital increased, the volume of market risk accepted by AKIBANK pegged at below 75% of Tier 1 capital.

When assessing the risk profile, ACRA continues to take into account non-core assets on the Bank’s balance sheet (more than 9% of Tier 1 capital) and the fact that their share in the total assets is on a downward trajectory.

The quality of the Bank’s other assets remains high. ACRA also assesses the quality of the portfolio of contingent liabilities as high, while the portfolio of guarantees tends to deflate.

ACRA assesses the Bank’s liquidity and funding position as adequate. AKIBANK’s liquidity position is strong, which is particularly confirmed by its short-term liquidity shortage indicator. ACRA’s base case scenario shows a liquidity surplus of RUB 7.6 bln, while the stress test scenario indicates 24%. The Bank maintains a large volume of funds in accounts at the Bank of Russia and other credit institutions (mainly with high creditworthiness), and it also holds a large portfolio of securities, which may be used to raise additional liquidity. ACRA notes no imbalances over longer periods (the long-term liquidity shortage indicator exceeds 85%).

As of December 31, 2021, the concentration of the Bank's funding sources was rather high: the share of funds held by individuals amounted to 65.1% of total liabilities (60.64% as of December 31, 2020); the share of funds of the ten largest groups of creditors / depositors was about 24% of total liabilities and that of the largest group was less than 5%.

Key assumptions

  • Maintaining the current business model within the 12 to 18-month horizon.

Potential outlook or rating change factors

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

A positive rating action may be prompted by:

  • Reduction of loan portfolio concentration while maintaining the quality of loans;

  • Decreased volume of non-core assets.

A negative rating action may be prompted by:

  • Worse operational efficiency metrics;

  • Deterioration in liquidity position;

  • Significantly lower quality of the Bank's assets and declining capacity to absorb losses with capital;

  • Growth in the resource base’s concentration on the funds of the largest groups of creditors.

Rating components

Standalone Creditworthiness Assessment (SCA): bb.

Adjustments: none.

Support: no.

Issue ratings

No outstanding issues have been rated.

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 PJSC «AKIBANK» was published by ACRA for the first time on May 31, 2018. 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 PJSC «AKIBANK», information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS financial statements of PJSC «AKIBANK» and the financial statements of PJSC «AKIBANK» drawn up in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited, and PJSC «AKIBANK» 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 PJSC «AKIBANK». No conflicts of interest were identified in the course of credit rating assignment.

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