Affirming the credit rating of «Bank Otkritie Financial Corporation» (Public Joint-Stock Company) (hereinafter, the Bank) with the “Rating under revision: developing” status reflects a potential change of the standalone creditworthiness assessment (SCA) in the short term. The rating action takes into account the following factors: (1) the remaining uncertainty with regard to the Bank’s development strategy amid change of management; (2) the ongoing consolidation of the Bank’s group within the Banking Sector Consolidation Fund (BSCF) and the accompanying revaluation of the asset quality; (3) minimization of short-term risks for the Bank’s financial stability stemming from the significant support of the Bank by the government represented by the Central Bank of the Russian Federation.
Key rating assessment factors
information regarding the Bank’s financial standing as well as further actions by the temporary administration and by the Bank of Russia in order to update standalone creditworthiness assessment and the final rating. ACRA also draws attention to additional uncertainty as to the Bank’s future business model following consolidation by «Bank Otkritie Financial Corporation» (PJSC) of such assets as Public Joint-stock Company Rosgosstrakh Insurance Company, Public Joint-stock Company Rosgosstrakh Bank, Otkritie Broker JSC, JSC NPF LUKOIL-Garant, Joint-stock Company NPF of Electric Power Industry, and Joint-stock Company NPF RGS.
ACRA classifies the Bank as a rated entity with state influence and assesses state’s influence on the Bank as very strong and its systemic importance as medium. Therefore, ACRA adjusts the Bank’s SCA three notches up. The further rating dynamics is expected to mainly reflect changes in the Bank’s SCA, while any changes in our assessment of the state support are less probable in the next 12-18 months.
The Agency continues monitoring the current situation as well as measures to restore the Bank’s financial stability and plans to consider the matter of resolving the status of the credit rating within the next 90 days.
Key assumptions
- No priority for payments under specific categories of unsecured commitments;
- Establishment of a new management team in the Bank within the next three months;
- Provision of sufficient liquidity and funding by the Bank of Russia.
Potential outlook or rating change factors
A positive rating action may be prompted by:
- Capital injection by the Bank of Russia and stabilization of capital adequacy ratio at a level compliant with regulatory requirements;
- Significant improvement in the quality of assets, in particular, with respect to corporate lending;
- In the long term, development of an updated business model and strategy of the Bank, and management quality improvement.
A negative rating action may be prompted by:
- Decisions made by the Bank’s temporary administration to prioritize specific claims of creditors;
- Further decline of standalone creditworthiness for the lack of any compensatory government support measures.
Removal of the “Rating under revision” status may be prompted by:
- Provision of material information regarding the financial standing of the Bank and companies acquired by the group in order to update standalone creditworthiness assessment and the final rating.
Rating components
Standalone creditworthiness assessment (SCA): bb-.
Adjustments: state support: +3 notches.
Regulatory disclosure
The credit rating and its status have been assigned under the national scale for the Russian Federation and is based on the Methodology for Credit Ratings Assignment to Banks and Bank Groups Under the National Scale for the Russian Federation, the Methodology for Analyzing Relationships Between the Rated Entity and the State, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.
The credit rating of «Bank Otkritie Financial Corporation» (Public Joint-Stock Company) was published on July 3, 2017 for the first time. The credit rating is expected to be revised within 90 days following the rating action date (November 30, 2017).
The assigned credit rating and its status are based on the data provided by «Bank Otkritie Financial Corporation» (Public Joint-Stock Company), information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using IFRS consolidated statements of «Bank Otkritie Financial Corporation» (Public Joint-Stock Company) and statements of «Bank Otkritie Financial Corporation» (Public Joint-Stock Company) composed in compliance with the Bank of Russia Ordinance No. 4212-U dated November 24, 2016. The credit rating is solicited, and «Bank Otkritie Financial Corporation» (Public Joint-Stock Company) participated in its assignment.
No material discrepancies between the provided data and the data officially disclosed by «Bank Otkritie Financial Corporation» (Public Joint-Stock Company) in its financial statements have been discovered.
ACRA provided additional services to «Bank Otkritie Financial Corporation» (Public Joint-Stock Company). No conflicts of interest were discovered in the course of credit rating assignment.
Disclosure of deviations from approved methodologies. The funding and liquidity factor was assessed based on the official statement of the Bank of Russia regarding guarantees that the Bank will continue its operation, and funding and liquidity will be provided to the Bank as needed.
