The credit rating of MARITIME BANK (hereinafter, MARITIME BANK, or the Bank) reflects the Bank’s comparably low assessment of business profile, adequate capital adequacy, critical risk profile, satisfactory liquidity and funding position, and the likelihood of support from the key shareholder.
The outlook has been changed to Positive given a high likelihood of a positive credit rating action in view of a significant growth of the Bank's incomes and changes in the profile of assets.
MARITIME BANK, located in Moscow, is a small bank in terms of assets. It focuses on corporate customers, in particular customers in the maritime and river transportation industries. According to ACRA's estimates, the Bank is among top 200 Russian banks in terms of equity and assets.
key assessment factors
The business profile assessment has been upgraded based on the improved diversification of the Bank’s operating income following a significant growth of fee and other income. The Agency also notes a significant increase in corporate account balances. These changes are in line with the Bank's strategic plans for the development of transactional and digital lines of business. At the same time, the assessment of the Bank's franchise in the Russian banking market has remained weak in view of its relatively small size compared to the banking system of Russia.
ACRA upgrades the Bank's capital adequacy assessment to adequate. The growth of fee and other income allowed the Bank to demonstrate a fairly high profit, regardless a significant increase in loan loss provisions. As a result, the averaged capital generation ratio (ACGR), calculated in accordance with ACRA's methodology based on data for the past five years, has remained positive, which caused an upgrade in the capital adequacy assessment. The Agency expects that the Bank will be able to maintain its profitability in the medium term.
Capital adequacy ratios has remained comparably high, which allows the Bank to maintain acceptable credit risk absorption capacity over the next 12–18 months amid growth of problem debt. ACRA’s stress test shows that the Bank is capable of withstanding an increase in the cost of risk (ranging from 300–500 bps) without breaching the N1.2 ratio.
The Bank’s operational efficiency is comparable with peers. The cost-to-income ratio (CTI) has been declining gradually on the back of the abovementioned growth of fee and other incomes. The net interest margin (NIM) has been declining as well, which is explained by a shrink in the share of loan income in the Bank's operational income.
The risk profile assessment has been downgraded to critical. The Agency notes a significant growth of the share of non-performing and potentially non-performing loans in the Bank's loan portfolio, which resulted in the downgrade of the risk profile assessment in accordance with ACRA's methodology. The growth is partially connected with a significant decline in the volume of loans issued due to a change in the Bank's strategic targets. For the same reason, the loan portfolio concentration, which is estimated by the share of the ten largest groups of borrowers in the total volume of loans, has also increased. At the same time, the Agency notes a decrease in the ratio of the net loan portfolio volume (including additional provisions) to the sum of assets and common equity. If this trend persists, the influence of the loan portfolio quality factor on the overall risk profile assessment will decrease, which may result in an upgrade of the assessment in the future.
The liquidity and funding position is satisfactory. As of January 1, 2023, the Bank was capable of withstanding a substantial outflow of client funds in both ACRA’s base case and stress scenarios. The long-term liquidity has remained adequate; however, the Agency notes that funding concentration indicators have grown, causing the factor score downgrade. Following an inflow of funds to corporate accounts, the share of this funding source has become dominant. Moreover, the share of funds of the ten largest groups of lenders in the Bank’s total liabilities has also grown.
ACRA has also made an upward adjustment to the Bank’s standalone creditworthiness assessment (SCA) given the likelihood of shareholder support. The adjustment takes into account the history of the Bank’s support from its key beneficiary and/or its companies. Financial support from the Bank’s owner has included capital injections, conversion of subordinated loans, and acquiring non-core assets and non-performing loans from the Bank’s balance sheet. In accordance with the Methodology for Analyzing Rated Entities Associated with a State or a Group, the Bank’s credit rating has been increased by one notch relative to its SCA.
KEY ASSUMPTIONS
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Maintaining the current strategy and business model within the 12 to 18-month horizon.
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Maintaining a high quality securities portfolio.
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Maintaining capital adequacy ratio at a high level.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Positive outlook assumes that the rating is highly likely to be upgraded within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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Declining ratio of the loan portfolio's book value to assets and common equity;
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Lower reliance of the Bank on the funds from the largest lenders/depositors.
A negative rating action may be prompted by:
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Declining Tier-1 capital adequacy ratio;
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Declining fee and other incomes;
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Lower operational efficiency;
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Deteriorating liquidity position.
rating components
SCA: b.
Adjustments: none.
Support: +1 notch for the shareholder's support.
ISSUE RATINGS
There are no outstanding issues.
regulatory disclosure
The credit rating of MARITIME BANK 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, Methodology for Analyzing Rated Entities Associated with a State or a Group, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of MARITIME BANK was published by ACRA for the first time on June 1, 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 MARITIME BANK, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS financial statements of MARITIME BANK and the financial statements of MARITIME BANK drawn up in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited, and MARITIME BANK participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to MARITIME BANK. No conflicts of interest were discovered in the course of credit rating assignment.
