The credit rating of MB RUS Bank (hereinafter, MB RUS Bank, or the Bank) is based on its strong capital adequacy position, adequate funding and liquidity, as well as its adequate risk profile and continued moderate assessment of the business profile.
The Developing outlook was previously assigned to the Bank’s credit rating, which reflected the Agency’s opinion regarding a number of factors that had come into place amid uncertainty in the auto loan market and were capable of having different impacts on the rating. The outlook has been changed to Stable due to ACRA’s expectations regarding the further development of the Bank over the next 12–18 months as long as funding remains stable and asset quality does not deteriorate.
The Bank’s focus was previously consumer lending to facilitate automobile purchases from authorized dealers. In April 2023, a deal was closed to sell the Bank; currently it belongs to a holding company (hereinafter, the Supporting Entity) that specializes in selling and servicing premium and luxury class cars. Due to most western carmakers exiting the market or suspending operations, the issuance of new auto loans was stopped in March 2022 and then resumed in December 2023.
KEY ASSESSMENT FACTORS
The Bank’s moderate business profile assessment (bb+) is based on its low positions in terms of the size of equity compared to other Russian credit institutions, as well as the low diversification of operating income due to the specialized focus of the Bank’s activities. At the end of 2023, a new three-year strategy was developed, which seeks to considerably develop the retail business, achieve multiple growth of the loan portfolio, and make the Bank one of Russia’s leading providers of auto loans. To achieve these aims, MB RUS Bank obtained a license to accept retail deposits in in May 2024; in the future, these funds should become the core of the funding base. The assessment of management quality is driven by the clear and appropriate organizational structure and takes into account the reduction in additional possibilities of managerial control that were based on the operational integration with the previous owner.
Strong capital adequacy position. On the back of the shrinking volume of the loan portfolio in 2023, as well as in view of the Bank’s positive financial performance, the loss absorption buffer and regulatory capital adequacy ratios continue to grow. As of January 1, 2024, the adequacy of Tier 1 capital (N1.2) was 45.03%. At the same time, the averaged capital generation ratio (ACGR) calculated by ACRA for 2019–2023 was strong. The Agency’s stress test shows that MB RUS Bank is still able to withstand an increase in credit risk far above 500 bps without violating capital adequacy ratios.
The adequate risk profile assessment is based on the volumes of problem and potential problem debt on the Bank’s balance sheet. However, according to ACRA’s estimates, loan portfolio quality remains fairly high. The risk profile is still supported by significant granularity of the loan portfolio, combined with an adequate risk management system.
The strong liquidity position and a concentrated funding profile. Currently, MB RUS Bank has a significant reserve of highly liquid funds, including nostro accounts at leading Russian credit institutions. The short-term liquidity shortage indicator reflects excess liquidity in ACRA’s base case and stress scenarios. There are no imbalances in repayment dates of assets and liabilities on a long-term horizon. The Bank’s main source of funding is funds from legal entities. Given the structural specifics of the loan portfolio in correlation with a substantial volume of capital and raised funds, the Agency assesses the funding sources as fairly stable for the Bank in the context of its current business model. The concentration on funds from the largest lender and the 10 largest lenders is assessed as heightened, which negatively affects the funding assessment.
The neutral support assessment is based on, among other things, the results of a comparative analysis of the creditworthiness of the Bank and the Supporting Entity.
KEY ASSUMPTIONS
- High N1.2 capital adequacy ratio.
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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Significant improvement in loan portfolio quality, provided that other creditworthiness factors do not deteriorate;
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Strengthening and further growth of the scale of the Bank’s business thanks to adequate strategy execution.
A negative rating action may be prompted by:
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Declining loan portfolio quality;
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Worsening of the liquidity position;
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Negative impact of changes to the Bank’s ownership on its standalone creditworthiness assessment (SCA).
RATING COMPONENTS
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, 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 creditworthiness assessment of the Supporting Entity was determined based on the principles of the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation.
The credit rating of MB RUS Bank was published by ACRA for the first time on September 11, 2020. 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 MB RUS Bank, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS statements of MB RUS Bank and the financial statements of MB RUS Bank drawn up in compliance with Bank of Russia Ordinance No. 6406-U dated April 10, 2023. The credit rating is solicited and MB RUS Bank 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 MB RUS Bank. No conflicts of interest were discovered in the course of credit rating assignment.
