The credit rating of JSC «REALIST BANK» (hereinafter, REALIST BANK, or the Bank) has been reflects low standalone creditworthiness assessment (SCA), which is determined taking into account a moderate business profile assessment, strong capital adequacy, neutral risk profile assessment, and satisfactory funding and liquidity position.
REALIST BANK is a small credit institution whose main lines of business include corporate lending, commercial and special-purpose vehicle loans, bank guarantees, financing goldmining companies, trading in gold, and foreign exchange transactions.
Key assessment factors
The weak business profile assessment reflects the limited assessment of the Bank's franchise. According to ACRA's estimates, the Bank is among top 150 credit institutions in equity and assets. The Bank occupies comparably low business positions in the Russian banking sector. At the same time, the Bank holds a sustainable market position in the leasing niche. The main areas of the Bank's operations include Moscow and the Siberian Federal District where its customer base is stable. The Agency notes significant changes that have been made to the Bank's top management since 2022. The operating income diversification is medium and it factors in both additional incomes received by the Bank in 2022 from transactions in securities and precious metals and the projected income structure.
ACRA still assesses the Bank's capital adequacy as strong. The Bank has maintained its capital adequacy ratios at an adequate level, and the current capital adequacy metrics allow the Bank to withstand a significant increase in the cost of risk without violating the regulatory standards. At the same time, as noted by the Agency, the Bank's regulatory capital adequacy metrics declined in 2022 compared to 2021 due to the growth of the volume of lending and leasing transactions. The Bank's profit generation potential is assessed as moderate but tending to grow. Operational efficiency metrics are relatively high.
Neutral risk profile assessment. The Bank's loan portfolio contains a moderate share of non-performing and potentially non-performing loans that declined in 2022, according to ACRA's estimates. The concentration on the ten largest groups of borrowers is acceptable. The quality of management of the main risks is assessed as satisfactory in comparison with peers. The quality of the largest principals for the issued guarantees is assessed as adequate.
Satisfactory funding and liquidity position. The liquidity assessment takes into account the seasonal nature of the business of a significant portion of the Bank's clients that are gold mining companies. The issuance of loans to these companies in the first half of year significantly impairs the short-term and long-term liquidity metrics. Subsequent inflow of funds to customer accounts and repayment of these loans at the end of the gold mining season lead to an increase in liquidity metrics to high values.
The concentration of the Bank' resource base is somewhat increased, while the diversification of funding sources is assessed as adequate.
Sticking to the Bank's current strategy and business model in the next 12–18 months.
Retaining the Bank's core client base in terms of active and passive transactions.
Potential outlook or rating change factors
The Stable outlook assumes that the credit rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
Lower volume of non-performing loans and/or loan portfolio concentration;
Higher resource base diversification and stabilization of liquidity metrics as per ACRA's methodology;
Sustainable improvement of the operational income diversification and business expansion along with a successful implementation of strategic plans amid substitution of the Bank's management team.
A negative rating action may be prompted by:
Loss of a significant share of core client base in terms of active and passive transactions;
Continued worsening of capital adequacy and liquidity metrics;
Significant increase in overdue loans or other non-performing and potentially non-performing exposures.
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 and the Key Concepts Used by Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of JSC «REALIST BANK» was published by ACRA for the first time on November 30, 2017. 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 «REALIST BANK», information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using the IFRS financial statements of JSC «REALIST BANK» and the financial statements of JSC «REALIST 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 «REALIST 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 ancillary services to JSC «REALIST BANK». No conflicts of interest were identified in the course of credit rating assignment.