The credit rating of JSC NOKSSBANK (hereinafter, the Bank) is based on the moderately low assessment of the business profile, strong capital adequacy, weak risk profile assessment, and adequate funding and liquidity position.
JSC NOKSSBANK is a regional credit institution that offers financial services primarily in Moscow and the Volgograd Region. The Bank is headquartered in Volgograd. Its main lines of business are corporate and consumer lending, as well as providing bank guarantees. According to ACRA’s estimates, the Bank ranks among the top 200 credit institutions of the Russian Federation in terms of equity.
KEY ASSESSMENT FACTORS
The moderately low business profile assessment (bb-) is related primarily to the Bank’s weak franchise, taking into account its comparatively small size in terms of the Russian banking system. At the same time, the Bank demonstrates sufficiently high diversification of operating income, which is formed mainly by interest income from legal entities and individuals, as well as commission income from providing bank guarantees. In the context of the Russian banking sector, the quality of the Bank’s management is satisfactory, and the approach to strategic planning is moderately conservative. The Agency notes that the ownership structure of the Bank is transparent.
ACRA assesses the Bank’s capital adequacy as strong since regulatory ratios are maintained at a sufficiently high level and the Bank has good operational efficiency. ACRA notes the Bank’s high capital adequacy ratios, while its ability to generate capital supports the high assessment of the factor. The Bank’s averaged capital generation ratio (ACGR) for 2020–2024 is 198 bps. The Bank’s operational efficiency indicators — CTI (cost-to-income) and net interest margin (NIM) — for 2022 to 2024 are higher than that of most peer banks and have a positive impact on the capital adequacy assessment.
The risk profile assessment remains weak. The share of loans of the fifth quality category decreased to 11.3% of the total loan portfolio by December 31, 2024 from 21.4% as of December 31, 2023. However, the concentration on the ten largest groups of borrowers is still quite high, which leads to the weak assessment of the Bank’s risk profile. At the same time, ACRA notes a significant increase in the volume of the loan portfolio by the end of 2024, which, in the Agency’s opinion, poses the risk of an increase in the share of problem debt in the future.
ACRA still assesses the quality of the Bank’s risk management system as satisfactory and corresponding to the scale and scope of its business.
Adequate funding and liquidity position. The Bank is able to withstand a significant outflow of client funds in both ACRA’s base case and stress scenarios thanks to a large stock of high-liquid assets (mainly interbank loans and funds held with the Bank of Russia). ACRA assesses the long-term liquidity position as strong, mainly due to the large volume of equity and the Bank’s funding structure. On the other hand, the abovementioned growth of the loan portfolio puts pressure on the long-term liquidity metrics, and their further decline may negatively affect the liquidity assessment and result in downgrading the credit rating.
In the Agency’s opinion, the Bank’s concentration on the largest groups of lenders and depositors is heightened because the shares of the largest group of lenders and the ten largest groups of lenders in the structure of liabilities exceed the corresponding thresholds established by ACRA’s methodology.
KEY ASSUMPTIONS
- Maintaining the current business model in the next 12–18 months.
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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Declining volume of non-performing loans;
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Significantly lower concentration of the loan portfolio.
A negative rating action may be prompted by:
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Deteriorating liquidity position;
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Declining capital adequacy metrics;
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Worse operational efficiency;
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Growth of lending to related parties;
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Growth of non-performing loans and lower quality of the portfolio of issued guarantees;
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Higher concentration on the largest credit risks.
RATING COMPONENTS
Standalone creditworthiness assessment (SCA): bb.
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 JSC NOKSSBANK was published by ACRA for the first time on July 2, 2018. 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 JSC NOKSSBANK, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS financial statements of JSC NOKSSBANK and financial statements of JSC NOKSSBANK drawn up in compliance with the Bank of Russia’s requirements. The credit rating is solicited and JSC NOKSSBANK 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 JSC NOKSSBANK. No conflicts of interest were discovered in the course of credit rating assignment.
