The credit rating of “Bank Otkritie Financial Corporation” (PJSC) (hereinafter, Otkritie, or the Bank) reflects the Bank’s high standalone creditworthiness assessment (SCA), which is based on its strong business profile, adequate capital position, adequate risk profile, and adequate funding and liquidity assessment.

The credit rating is positively impacted by the potential support from the Bank’s shareholder (the Shareholder, or the Supporting Entity), a credit institution rated by ACRA at AAA(RU).

Currently, Otkritie is being integrated into the Shareholder’s group, and its business is being handed over to the Shareholder. The Positive outlook reflects ACRA’s opinion that, during the integration, the degree of support from the Shareholder is becoming stronger.

The credit ratings of the bond issues (RU000A101GR3, RU000A102R73, RU000A1035Y6, RU000A103PT6) have been affirmed at АА(RU), i.e. on par with the Bank’s rating.

key assessment factors

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. At the same time, as the Bank and the Shareholder merge, the Bank’s standalone positions in the financial services market will decline, which constrains to some extent the final score for the business profile. The Bank’s diversification has remained high in 2023 due to a universal nature of its business, but ACRA does not exclude its potential decline caused by business transformation in the next 12 months. The Agency also notes a high degree of integration between the corporate management bodies of the Bank and the Shareholder.

The adequate capital position is determined by a sufficiently high loss absorption buffer. As of November 1, 2023, the N1.2 ratio was 15.82%. The current level of capital adequacy allows the Bank to withstand an increase in credit risk by more than 500 bps. Otkritie is expected to maintain its capital adequacy metrics at a high level until the integration is completed. Given the financial performance in 2022–2023, and the expected dividend payments to the Shareholder, the Bank’s capital generation capacity is assessed by the Agency neutrally. In 2023, the Bank has increased its operating efficiency, but in 2020–2022 its CTI remained rather high.

The risk profile assessment has been upgraded to adequate mostly due to a decline in the Bank’s market exposure following a reduction in its net currency position and the portfolio of assets at fair value through profit or loss. As of September 30, 2023, 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 declined over the past 12 months) and the acceptable level of portfolio concentration on the ten largest groups of borrowers. Due to the integration and transfer of business to the Shareholder, ACRA expects a significant change in the Bank’s asset structure in the next 12–18 months but does not forecast a deterioration in asset quality, which is supported by the integration of the Bank’s risk management system into the Shareholder’s system. With this in mind, the quality of risk management is still assessed as adequate.

The Bank’s liquidity position is assessed as adequate. As of September 30, 2023, the Bank had the volume of liquid assets (including undrawn asset-backed credit lines from the Bank of Russia) which is sufficient to cover potential cash outflows in the base case scenario of short-term liquidity shortage indicator (STLSI), while the stress scenario shows a moderate shortage of liquidity. At the same time, ACRA notes that the N2 ratio has declined in 2023 (23.76% as of November 1, 2023). The Agency notes that the Bank has a wide range of sustainable possibilities to raise liquidity from both external sources and the Shareholder, so that it has retained the adequate liquidity assessment.

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.

The degree of support that the Bank can receive from the Shareholder is determined by the following factors:

  • High creditworthiness of the Supporting Entity;

  • Significant economic and reputational losses for the Shareholder in case the Bank’s financial stability deteriorates;

  • Full operational and shareholder control of the Bank by the Shareholder.

At the same time, ACRA takes into account that the scale of the Bank’s business affects the potential of extraordinary support. In view of the above, ACRA takes into account the degree of support by adding two notches to the Bank’s SCA.

Key assumptions

  • Timely provision of extraordinary support by the Shareholder if necessary.

  • Maintaining the access to the Bank of Russia’s liquidity.

  • Maintaining the high capital adequacy metrics.

  • Completion of the integration of the Bank’s business into the Shareholder’s group.

Potential outlook or rating change factors

The Positive outlook assumes that the rating will highly likely be upgraded within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Stronger support from the Shareholder.

A negative rating action may be prompted by:

  • Significant worsening of the Bank’s capital adequacy metrics, asset quality, and liquidity position.

rating components

SCA: а+.

Support: SCA + two 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 (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 (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 (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.

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