The credit rating of Primtercombank (hereinafter, the Bank) reflects the Bank’s quite low assessment of business profile, strong capital adequacy, weak risk profile, and adequate funding and liquidity position.
Primtercombank is a small regional bank with a base license that has been operating in the Prymorye Krai since 1988. The Bank’s core business is focused on corporate and retail customers.
KEY ASSESSMENT FACTORS
The business profile assessment (b) reflects the scale of the Bank’s activities, as well as its weak competitive positions in the banking market. The operating income diversification is assessed as low: the Herfindahl—Hirschman index as of October 1, 2023 was 0.32; more than half of the Bank’s proceeds came from foreign exchange transactions. There is a risk of regional concentration, since most of the Bank’s operations are carried out in the Far Eastern region. The corporate governance system is comparable to that of peer regional banks. It is worth noting that the Bank’s ownership structure includes international capital as about half of the shareholder equity belongs to individuals and legal entities from the People’s Republic of China.
The strong capital adequacy position is due to the high values of regulatory standards, as well as strong financial performance demonstrated in recent years. As of March 1, 2024, the N1.2 ratio amounted to 19.16%. According to the results of ACRA’s stress test and taking into account the capital reserve, the Bank is able to withstand an increase in the cost of credit risk well above 500 bps. The Bank has been steadily generating profits over the past four years. Given the strong financial results for 2023, the 5-year average capital generation ratio (ACGR) exceeded 100 bps. Overall, the operational efficiency assessment is on par with peers, while a significant share of the Bank’s operating income is generated by items sensitive to market fluctuations.
The weak risk profile assessment reflects the share of non-performing and potentially non-performing assets that exceeds 5% of the loan portfolio and an increased concentration on the ten largest groups of borrowers (over 60% of the loan portfolio). The risk management system matches the specifics and scope of the Bank’s operations and is assessed as satisfactory.
Adequate funding and liquidity position. The Bank is able to withstand a substantial outflow of client funds both in ACRA’s base case and stress scenarios. As of October 1, 2023, the long-term liquidity shortage indicator (LTLSI) was within the range of strong values, while the short-term liquidity shortage indicator (STLSI) exceeded 90%.
The funding factor reflects a heightened reliance on the funds of the ten largest creditors/groups of creditors, while the diversification of funding sources is at boundary values and does not impair the assessment.
key assumptions
-
Absence of growth of non-performing and potentially non-performing assets on the Bank’s balance sheet.
-
Maintaining the current business model 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:
-
Declining level of non-performing and potentially non-performing assets;
-
Lower concentration of the loan portfolio on the ten largest groups of borrowers.
A negative rating action may be prompted by:
-
Much lower capital adequacy metrics;
-
Significant increase in non-performing and potentially non-performing assets;
-
Lower diversification of the resource base.
rating components
Standalone creditworthiness assessment (SCA): b+.
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 has been assigned to Primtercombank for the first time. 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 Primtercombank, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the financial statements of Primtercombank drawn up in compliance with the Bank of Russia’s Ordinance No. 6406-U dated April 10, 2023. The credit rating is solicited, and Primtercombank 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 Primtercombank. No conflicts of interest were discovered in the course of credit rating assignment.
