Affirming the credit rating of «Bank Otkritie Financial Corporation» (Public Joint-Stock Company) (hereinafter, the Bank) at BBB-(RU) and changing the status from “Rating under revision: developing” to “Rating under revision: positive” reflect a potential increase of the Bank’s standalone creditworthiness assessment (SCA) in the short term, which would drive the Bank’s rating upgrade. Rating affirmation takes into account the following factors: (1) the remaining uncertainty with regard to the Bank’s development strategy amid change of management that took place only recently; (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

The change of the rating status to “Rating under revision: positive” reflects improvements in the Bank’s capital adequacy under RAS after capital injection by the Bank of Russia as well as creation of substantial loan loss provisions with respect to problem loans. The rating revision will be completed within the next 90 days if and when the Agency receives material up-to-date information regarding asset quality of the Bank and other companies of the Bank group.

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.

Key assumptions

  • Provision of additional capital to the Bank by the Central Bank of the Russian Federation, if needed;
  • 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:

  • Stabilization of capital adequacy indicators;
  • In the medium term, 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:

  • 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 (February 27, 2018).

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. (1) 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. (2) The risk profile factor was not revised due to lack of required up-to-date information, which is related to organizational changes in the bank. (3) No stress testing of capital adequacy was performed due to lack of up-to-date information regarding the bank’s asset quality.

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Valeriy Piven
Managing Director, Head of Financial Institutions Ratings Group
+7 (495) 139 04 93
Suren Asaturov
Director, Financial Institutions Ratings Group
+7 (495) 139 04 80, ext. 130
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