The credit rating of Limited liability company “bank Round” (hereinafter, the Bank) has been upgraded since the capital adequacy assessment has been upgraded to strong. The Agency has maintained the low business profile assessment, satisfactory risk profile assessment, and adequate funding and liquidity assessment.
The credit rating outlook has been changed to Stable since the Bank’s business model has stabilized, and now it is focused on the payments segment and servicing clients’ settlements.
The Bank is a small, in terms of assets, universal bank that operates in Moscow and is focused on corporate customers.
key assessment factors
The moderately low (bb-) business profile assessment primarily reflects the Bank’s limited market positions in the sector, as well as a frequent change of strategy in the past. The Bank’s current business model is based on a tight cooperation with key partners that were previously linked to the Bank via its previous large-scale owners that have well-known brands.
Under this cooperation, the Bank continues to offer its services (cash and settlement services, servicing / conducting payments, acquiring, and foreign currency transactions) and loans to partners and their clients, counterparties, and employees. The Bank’s loan portfolio is less than 20% of the total assets and is largely made up of loans to SMEs, which adds to business diversification.
ACRA notes that operating environment instability, which began in February–March 2022, provoked a sharp restructuring of the business profile of the Bank. Thanks to this, the Bank’s revenue has surged, its structure has changed, and the balance sheet has undergone relevant changes. However, the sustainability of these trends will depend on multiple factors.
The capital adequacy assessment has been upgraded to strong due to a significant increase in revenues in 2022, when the Bank, according to its RAS reporting, showed a profit of RUB 1,714 mln, which improved the ability to generate capital. This year, the trend of stable generation of positive financial results is continuing: in H1 2023, according to RAS reports, the Bank’s after-tax profit amounted to RUB 1,019 mln. The Bank consistently maintains the regulatory ratios at a relatively high level: for example, on October 1, 2023, the N1.2 ratio was 19.85% (with an average of 17.39% over the past 12 months). Stress test conducted in line with ACRA’s methodology showed that the Bank is able to withstand an increase in the cost of risk over 500 bps without violating the key capital adequacy standards.
The satisfactory risk profile assessment reflects ACRA’s opinion on the quality of the Bank’s assets. The share of the loan portfolio in the total volume of assets remains at the level of the past year, with a low level of non-performing and potentially non-performing loans. At the same time, the Agency notes a significant increase in loan issuances in absolute terms, including to industries with an increased level of risk. The main volume of the Bank’s assets are short-term deposits with the Bank of Russia, as well as correspondent account with other financial institutions. ACRA notes receivables from companies related to depository activities and the issuance of Eurobonds, where credit risk management is challenging due to the current sanctions regime. The risk profile assessment is also constrained by heightened exposure to market risk due to the large volume of the Bank’s own securities portfolio.
Adequate funding and liquidity assessment. The Bank efficiently manages the maturities of assets and liabilities and has a comfortable liquidity cushion to maintain positive cumulative gaps at various time intervals.
High concentration on related groups of depositors is offset by the well-established relationships with these counterparties. In ACRA’s opinion, they will continue to be a reliable source of funding for the Bank.
key assumptions
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Maintaining the current business model.
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Maintaining the profitability of operations.
potential outlook or rating change factors
The Stable outlook assumes that the rating is highly likely to stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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Significant improvement of asset quality;
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Better market positions of the Bank on a wider range of business lines and the adequate level of risk on active transactions.
A negative rating action may be prompted by:
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Considerable decline of business stability or loss of competitive advantages, in particular, due to reduced cooperation with key partners;
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Substantial decline of asset quality, including growth of credit risks amid an expansion of the loan portfolio and/or guarantees.
rating components
Standalone creditworthiness assessment (SCA): bb+.
Individual adjustments: none.
Support: none.
issue ratings
No outstanding issues have been rated.
regulatory DISCLOSURE
The credit rating has been assigned to Limited liability company “bank Round” 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 Limited liability company “bank Round” was published by ACRA for the first time on November 23, 2022. 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 Limited liability company “bank Round”, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS financial statements of Limited liability company “bank Round” and the financial statements of Limited liability company “bank Round” drawn up in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited and Limited liability company “bank Round” 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 additional services to Limited liability company “bank Round”. No conflicts of interest were discovered in the course of credit rating assignment.
