The credit rating of Dalena Bank, Ltd (hereinafter, the Bank) has been upgraded based on the improvement of the risk profile assessment from satisfactory to adequate coupled with the Bank maintaining a moderately low business profile assessment, a strong capital adequacy position, and an adequate assessment of funding and liquidity.
The Bank is a small (in terms of assets) Moscow-based credit institution that has a basic banking license and is focused on providing cash and settlement services to corporate customers.
key assessment factors
The moderately low business profile assessment (bb-) reflects the Bank’s positions in the banking services market, as well as its lack of clear competitive advantages. As of October 1, 2023, diversification of operating income was assessed as moderate (Herfindahl-Hirschman index was 0.28), while the main sources of funds were interest income from placing funds with the Bank of Russia and from bills of exchange purchased from Russian credit institutions. The Bank’s strategy is conservative — it implies low risk tolerance, moderate growth, and a continued focus on cash and settlement services. This cautious approach helps the Bank minimize potential credit losses.
In addition to providing ordinary cash and settlement services to corporates, the Bank offers these services to individuals and legal entities declared bankrupt in accordance with Federal Law No. 127-FZ. The share of funds held in the accounts of bankrupt customers generally does not exceed 20% of the Bank’s liabilities. These funds are accumulated in the Bank for one to six months, thus generating additional fee and interest income.
ACRA believes that the business relations and connections of the Bank’s largest shareholder play a significant role in the Bank’s business and contribute heavily to attracting and retaining customers.
The strong capital adequacy assessment stems from high regulatory ratios that allow the Bank to withstand an increase in the cost of risk of over 500 bps. The Bank’s ability to generate capital is assessed as high — thanks to stable profits, the averaged capital generation ratio (ACGR) exceeds 100 bps. The Bank’s operational efficiency is assessed as low because although the cost to income ratio (CTI) has improved slightly, the net interest margin (NIM) is lower compared to other credit institutions with similar operating profiles.
The improvement of the risk profile assessment to adequate is due to the Bank’s consistency in taking risks — amid the minimum level of the loan portfolio, most of the assets are represented by receivables from the Bank of Russia, short-term deposits in large state-owned credit institutions, as well as high credit quality debt securities. ACRA assesses the quality of risk management as satisfactory.
The adequate funding and liquidity assessment stems from large volumes of liquid assets coupled with the significant concentration of funding sources. The calculation of the short-term liquidity shortage indicator (STLSI) shows that there is a considerable liquidity surplus in both the base case and stress scenarios of ACRA. The long-term liquidity shortage indicator (LTLSI) corresponds to a strong assessment. The diversification of the Bank’s resource base is low, with corporate clients accounting for the lion’s share of creditors. Concentration on the funds of legal entities is taken into account in the assessment of concentration on the funds of the largest creditors, and therefore the Agency has not reduced the funding assessment for this part.
key assumptions
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Maintaining the current business model featuring low risk appetite;
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Capital adequacy ratios and liquidity indicators remaining high;
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The quality of assets and securities remaining sufficiently high.
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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Higher diversification of funding sources;
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Expanding business scope, new sustainable business lines while maintaining a conservative approach to risks.
A negative rating action may be prompted by:
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Transition to a more aggressive development model;
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Increased funding base volatility.
rating components
Standalone creditworthiness assessment (SCA): bbb-.
Adjustments: none.
Support: none.
issue ratings
There are no outstanding issues.
regulatory disclosure
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 the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of Dalena Bank, Ltd was published by ACRA for the first time on March 25, 2019. 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 Dalena Bank, Ltd, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the financial statements of Dalena Bank, Ltd drawn up in compliance with Bank of Russia Ordinance No. 6406-U dated April 10, 2023. The credit rating is solicited and Dalena Bank, Ltd 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 Dalena Bank, Ltd. No conflicts of interest were discovered in the course of credit rating assignment.
