The credit rating of “Bank Otkritie Financial Corporation” (PJSC) (hereinafter, Otkritie, or the Bank) reflects the very high likelihood of extraordinary support from the shareholder, if necessary, due to the Bank’s high systemic importance. At the same time, Otkritie’s standalone creditworthiness assessment (SCA) reflects its strong business profile, adequate capital position, satisfactory risk profile, and adequate funding and liquidity assessment.
The credit ratings of the bond issues (ISIN RU000A101GR3, RU000A102R73, RU000A1035Y6, RU000A103PT6) have been affirmed at АА(RU), i.e. on par with the issuer’s rating.
Otkritie is a systemically important full-service bank. In July 2019, the financial rehabilitation procedure initiated with respect to Otkritie, which took around two years, was completed. The shareholder is considering withdrawing from the authorized capital of the Bank.
Otkritie acts as a holding entity of a banking group (hereinafter, the Group), which is actively strengthening its market positions by offering a wide range of financial services.
key assessment factors
The very high likelihood of extraordinary support from the supporting entity (hereinafter, the SE) is based on: 1) shareholder and operational control exercised by the SE; 2) facts of financial support to the Bank with capital and liquidity; 3) the Bank’s systemic importance for the national economy, since it partners with Russian strategic enterprises and state budgetary authorities and agencies and holds a significant amount of retail funds in its accounts (about 3%).
The degree of dependence of the Bank and the SE on homogenous risk factors is assessed as medium.
ACRA’s opinion on the level of support is expressed in determining the credit rating of Otkritie on par with that of the Russian Federation minus two notches.
The strong business profile assessment (a) stems from the market positions held by the Bank. Otkritie’s franchise in providing lending and transaction services to legal entities and individuals is also assessed as strong, and the diversification of operating income is assessed as high due to the versatility of the Group’s business. Support for the diversification of Otkritie’s revenue base was provided by the merger with PJSC “RGS Bank” in 2022. The Bank also aims to increase its operational efficiency in the medium term.
The adequate capital position is determined by a sufficiently high loss absorption buffer against the accepted balance sheet and off-balance sheet risks under both the regulatory standards (the value of capital adequacy ratios has increased compared to the previous year) and Basel III standards. The current level of capital adequacy allows the Bank to withstand an increase in credit risk by more than 500 bps. The capital generation capacity was sufficiently high in 2021, including after one-time income had been deducted; as of 9M 2022, the financial result from operations involving foreign currency and precious metals had a significant negative impact on this indicator.
Satisfactory risk profile assessment. As of September 30, 2022, the quality of the loan portfolio, which comprises more than half of Otkritie’s assets, was assessed as adequate, given the low share of non-performing loans (the share of IFRS 9 Stage 3 and POCI assets fell slightly over the past 12 months) and the acceptable portfolio concentration on the ten largest groups of borrowers. Compared to previous periods, the growth of the loan portfolio slowed down considerably in 2022, and in 2023 the Bank expects its loan portfolio growth to match the market average. The portfolio concentration on high-risk industries is moderate (0.8x of Tier 1 capital).
The volume of assets exposed to risks arising from the current changes in the operating environment does not currently have a significant impact on the Agency’s assessment of the Bank’s risk profile. The level of the Group’s market risk has declined slightly, however, it remains elevated, and securities still form a significant share of assets and are largely made up of investments of NPFs. The risk management quality is assessed as adequate.
The adequate liquidity position is based on the volume of highly liquid assets (including undrawn asset-backed credit lines from the Bank of Russia) which is sufficient to cover potential cash outflows, so that the short-term liquidity shortage indicator is fulfilled with a margin in both the base case and stress scenarios. Significant imbalances are not observed over longer periods (the long-term liquidity shortage indicator is assessed as adequate).
The well-balanced funding profile stems from an acceptable concentration of the resource base on the largest source and its low concentration on the largest groups of lenders. The share of the Bank of Russia’s funds in the Bank’s liabilities is insignificant.
Key assumptions
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Timely provision of extraordinary support by the shareholder if necessary;
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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 to 18-month horizon.
A positive rating action may be prompted by:
- Continued trend of improvement of loan portfolio quality, higher operational efficiency or higher capital generation capacity, which, taken together, may result in a higher SCA.
A negative rating action may be prompted by:
- Substantial decline in the Bank’s systemic importance to the Russian economy;
- Significant worsening of the quality of the Bank’s assets and deterioration of the liquidity position.
rating components
SCA: а+.
Support: on par with the RF minus 2 notches.
issue ratings
“Bank Otkritie Financial Corporation” (PJSC), BO-P06 (RU000A101GR3), maturity date: February 25, 2025, issue volume: RUB 15 bln, — АА(RU).
“Bank Otkritie Financial Corporation” (PJSC), BO-P07 (RU000A102R73), maturity date: February 6, 2026, issue volume: RUB 15 bln — АА(RU).
“Bank Otkritie Financial Corporation” (PJSC), BO-P08 (RU000A1035Y6), maturity date: June 4, 2026, issue volume: RUB 10 bln — АА(RU).
“Bank Otkritie Financial Corporation” (PJSC), BO-P09 (RU000A103PT6), maturity date: September 19, 2024, issue volume: RUB 15 bln — АА(RU).
Rationale. The issues listed above are senior unsecured debt of the Otkritie. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them as equal to other existing and future unsecured and unsubordinated debt obligations of the Bank in terms of priority. According to ACRA’s methodology, the credit ratings of the issue are equivalent to that of Otkritie.
regulatory disclosure
The credit ratings have been assigned to “Bank Otkritie Financial Corporation” (PJSC) and the bond issues (ISIN RU000A101GR3, RU000A102R73, RU000A1035Y6, RU000A103PT6) of “Bank Otkritie Financial Corporation” (PJSC) under the national scale for the Russian Federation based on the Methodology for the Analyzing Rated Entities Associated with a State or a Group, 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 Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit ratings of “Bank Otkritie Financial Corporation” (PJSC) and the bond issues (ISIN RU000A101GR3, RU000A102R73, RU000A1035Y6, RU000A103PT6) of “Bank Otkritie Financial Corporation” (PJSC) were published by ACRA for the first time on July 3, 2017, March 3, 2020, February 12, 2021, June 10, 2021, and September 23, 2021, respectively. The credit rating of “Bank Otkritie Financial Corporation” (PJSC) and its outlook and the credit ratings of the bond issues (ISIN RU000A101GR3, RU000A102R73, RU000A1035Y6, RU000A103PT6) of “Bank Otkritie Financial Corporation” (PJSC) are expected to be revised within one year following the publication date of this press release.
The credit ratings were assigned based on data provided by “Bank Otkritie Financial Corporation” (PJSC), information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the consolidated IFRS financial statements of “Bank Otkritie Financial Corporation” (PJSC) and the financial statements of “Bank Otkritie Financial Corporation” (PJSC) drawn up in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit ratings are solicited and “Bank Otkritie Financial Corporation” (PJSC) participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided additional services to “Bank Otkritie Financial Corporation” (PJSC). No conflicts of interest were discovered in the course of credit rating assignment.
