The credit rating of Bank RRDB (JSC) (hereinafter, RRDB, or the Bank) stems from the Bank’s sustainable business profile, strong capital adequacy, satisfactory risk profile, and adequate funding and liquidity assessment.
RRDB acts as a settlement center for its parent holding company (hereinafter, the Supporting Entity, the SE, or the Shareholder) and provides a wide range of services to the SE's business partners, employees, and a wide range of counterparties.
key assessment factors
The Bank’s business profile assessment reflects its strong positions in the Russian banking sector: RRDB ranks 15th in terms of capital among Russian banks. The Bank has a high-quality brand, and its operating income is adequately diversified. The current strategy of the Bank is aimed at universalization with a focus on large corporate businesses while maintaining the deep expertise in servicing fuel and energy companies. At the same time, the Agency takes into account potential risks associated with a fast growth of assets.
RRDB is the temporary administrator of Peresvet Bank (the procedure is supposed to run until 2032). ACRA estimates RRDB’s engagement in the rehabilitation as neutral in terms of its creditworthiness.
ACRA assesses the Bank’s capital adequacy as strong, which is positive for the Bank's Standalone Creditworthiness Assessment (SCA). The regulatory RAS capital adequacy ratios are met by the Bank with a margin. ACRA notes that the ratios have declined since the last rating action date due to growing volume of the loan portfolio, however, the Agency does not expect the capital adequacy indicator to fall to a level that could impact the assessment of this factor within the 12 to 18-month horizon. In addition, the Bank has a high capital generation potential (the averaged capital generation ratio, or ACGR, has been adequate over the past five years). According to ACRA’s stress test, the Bank has a high capacity to absorb potential credit risks: RRDB can withstand a significant increase in the cost of risk without breaching regulatory requirements (including taking into account the expected growth of the loan portfolio).
The satisfactory risk profile assessment reflects the level of the Bank’s non-performing loans (that remains very low), combined with the loan portfolio’s heightened concentration on major borrowers and fuel and power companies. ACRA also takes into account the Bank's historically low losses and a good quality of the current portfolio. ACRA notes that following an increase in the volume of loan exposures in 2022–2023, the lending concentration on certain areas has grown significantly although the portfolio quality has not deteriorated.
The volume of market exposures has also grown as part of transformation of currency balance, although, according to the Bank's expectations, it will decline gradually.
The quality and diversification of the Bank’s securities portfolio is good, as the portfolio includes bonds issued by the largest Russian non-financial corporations and banks, as well as the Russian government and quasi-sovereign borrowers. In addition, the Bank places liquid funds at a number of (mainly Russian) banks with high creditworthiness.
The funding and liquidity factor is assessed as adequate, taking into account the Bank’s short-term liquidity surplus in ACRA’s base case scenario and a deficit in the stress scenario, and the stable long-term liquidity position of the Bank. At the same time, the long-term liquidity shortage indicator is under pressure due to the significant volume of client funds placed in term deposits. At the same time, the Bank possesses a number of instruments to attract additional liquidity if necessary.
The high funding concentration on the largest group of lenders (including the SE and associated companies) and the 10 largest groups of lenders constrains the factor assessment. The share of corporate funds in the Bank’s liabilities is high; however, it is worth noting that the Bank's relations with the key lenders are stable and predictable, while this risk is actually included in the assessment of the concentration on the funds of the largest groups of lenders, so that the Agency does not downgrade the funding factor assessment in this regard.
High likelihood of support from the Supporting Entity. ACRA believes that the creditworthiness of the Shareholder is high and it has sufficient resources to provide RRDB with capital and liquidity if necessary. The Agency notes that the shareholder significantly recapitalized RRDB in 2016, which confirms the SE’s interest in developing the Bank’s business. The high level of support is also backed by the Bank’s deep operational integration in the group. In its assessment of the likelihood of support, ACRA also takes into account RRDB's internal regulations (approved by the SE's representatives who are members of the Bank's management body) that prescribe a request to the Shareholder in case of need for support. The assessment of the likelihood of support is capped by moderate strategic risk for the SE, given the differing business areas of the Bank and the Shareholder. In view of the above, the credit rating is set three notches higher than the Bank’s SCA.
KEY ASSUMPTIONS
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Cost of credit risk no higher than 3% within the 12 to 18-month horizon.
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Moderate level of non-performing loans (as per ACRA’s estimate) within the 12 to 18-month horizon.
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Strong capital adequacy 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:
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Lower loan portfolio growth rate amid a stably low level of problem loans;
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Lower concentration of the loan portfolio on the largest groups of borrowers;
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Increased diversification of funding sources.
A negative rating action may be prompted by:
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Worse quality of the loan portfolio (growth of the share of non-performing loans and the concentration);
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Deteriorating liquidity position of the Bank;
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Substantial decrease in profits and capital adequacy;
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Growing volume of market exposures compared to the common equity;
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Significant narrowing of the functions and declining importance of the Bank for the Shareholder.
rating components
SCA: а.
Adjustments: no.
Support: SCA plus three notches.
issue ratings
Bank RRDB (JSC), 001R-03 (RU000A100691), maturity date: March 8, 2024, issue volume: RUB 5 bln — AA(RU).
Bank RRDB (JSC), 001R-04 (RU000A101NQ1), maturity date: May 9, 2025, issue volume: RUB 5 bln — AA(RU).
Bank RRDB (JSC), 001R-05 (RU000A1025H2), maturity date: September 18, 2025, issue volume: RUB 5 bln — AA(RU).
Rationale. The bonds listed above are senior unsecured debt instruments of RRDB. Due to the absence of either structural or contractual subordination of the issues, ACRA ranks them as pari passu with other existing and future unsecured and unsubordinated debt obligations of the Bank. According to ACRA’s methodology, the credit ratings of the issues are equivalent to that of Bank RRDB (JSC).
regulatory disclosure
The credit ratings have been assigned to Bank RRDB (JSC) and the bonds (RU000A100691, RU000A101NQ1, RU000A1025H2) issued by Bank RRDB (JSC) 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 Methodology for Assigning Credit Ratings to Financial Instruments on the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit ratings of Bank RRDB (JSC) and the bonds issued by Bank RRDB (JSC) — RU000A100691, RU000A101NQ1, and RU000A1025H2 — were published by ACRA for the first time on July 25, 2017, March 14, 2019, May 14, 2020, and September 24, 2020, respectively. The credit rating of Bank RRDB (JSC) and its outlook and the credit ratings of the bonds of Bank RRDB (JSC) 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 RRDB (JSC), information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS consolidated financial statements of Bank RRDB (JSC) and the financial statements of Bank RRDB (JSC) drawn up in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit ratings are solicited, and Bank RRDB (JSC) 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 RRDB (JSC). No conflicts of interest were discovered in the course of credit rating assignment.
