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Rating Action:

Moody's changes outlook on Maritime Bank's B3 deposit ratings to stable

19 Dec 2018

London, 19 December 2018 -- Moody's Investors Service has today changed to stable from negative the outlook on B3 long-term local and foreign currency deposit ratings of Russia-based Maritime Bank and affirmed these ratings. Concurrently, the rating agency affirmed Maritime Bank's Baseline Credit Assessment (BCA) and adjusted BCA of b3, the bank's long-term and short-term local and foreign currency Counterparty Risk Ratings of B2/Not Prime, as well as its Not Prime short-term local and foreign currency deposit ratings. Maritime Bank's long-term and short-term Counterparty Risk Assessments (CR Assessments) of B2(cr) / Not-Prime(cr) were also affirmed.

A full list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

According to Moody's, the change of Maritime Bank's ratings outlook to stable from negative reflects the recent improvements in the bank's asset quality and profitability metrics and the rating agency's expectation of sustainability of these improvements over the next 12 to 18 months. Other factors underpinning the stable outlook on Maritime Bank's deposit ratings include its good capital adequacy level supported by the shareholder, as well as the bank's stable funding and liquidity.

Based on Maritime Bank's management data, Moody's estimates that the bank's ratio of problem loans to gross loans (where problem loans are defined as the sum of loans overdue by more than 90 days and restructured loans) nearly halved to approximately 14% of total gross loans as of 1 November 2018, compared to 30.8% reported as of the end of 2017. The reduction is mainly driven by a write-off or sale (both to the bank's shareholder and to third parties) of a big stock of problem loans over 2018. The bank's coverage of remaining problem loans by loan-loss reserves reported at 114% as of 1 November 2018 is conservative, with the ratio of "problem loans % (shareholder equity plus loan-loss reserves)" standing at 37% as of the same reporting date, broadly in line with the level reported by the bank's local peers. Maritime Bank's single-borrower concentration remains high. As of 1 November 2018, the bank's 20 largest credit exposures stood at around 246% of its shareholder equity.

Moody's forecasts Maritime Bank's profitability will be marginally positive in both 2018 and 2019. The bank reported RUB147 million IFRS net profits in the first six months of 2018, compared with RUB184 million posted for the whole of 2017. Maritime Bank's recurring income generation notably improved in 2018. In particular, the bank's net interest margin widened to 7.6% in the first half of 2018 from 5.10% in 2016, and the rating agency expects this indicator to remain at healthy levels in 2019. Maritime Bank's profit continues to be pressured by high credit losses, however, these declined notably to 3.1% (annualised) of the bank's average gross loans in the first half of 2018 from an average annual ratio of 11.3% posted over 2015-17, and Moody's expects this improving trend to protract into the next 12 to 18 months.

Moody's expects Maritime Bank's capital adequacy levels to remain roughly stable over the next 12-18 months, given some improvement in the bank's asset-quality and profitability metrics, the adequate coverage of the existing problem loans by loan-loss reserves, as well as low contemplated growth in risk-weighted assets. As of 1 November 2018, Maritime Bank reported a regulatory total capital adequacy ratio of 12.5% and a Tier 1 capital ratio of 11.2%. In 2016-17, the bank's capital has been supported by a series of conversions of subordinated debt into equity, jointly resulting in a RUB1 billion increase in common equity over two years to around RUB2.6 billion as of the beginning of 2018. Additionally, the bank benefited from the sale of loans to its shareholder.

Maritime Bank has so far demonstrated fairly stable dynamics of its customer funding base, supplemented by a conservative liquidity buffer exceeding 25% of total assets. As of 30 June 2018, customer funding accounted for as much as 98% of the bank's total liabilities and was around 50/50 split between corporate and individual deposits.

WHAT COULD MOVE THE RATINGS UP / DOWN

Moody's might take positive rating action on Maritime Bank's ratings in the long-term if it observes further significant improvements in the bank's solvency metrics, in particular in its asset quality and profitability, and if these trends are accompanied by stable funding and liquidity positions and a greater degree of business diversification.

Conversely, Maritime Bank's ratings might be downgraded, or the ratings outlook might be revised back to negative from stable, in case of the bank's failure to sustain the recently improved solvency metrics (in contrast with Moody's current central scenario expectations), or if the bank's liquidity profile weakens as a result of the increased volatility of its customer funding.

Issuer: Maritime Bank

..Affirmations:

....Adjusted Baseline Credit Assessment, affirmed b3

....Baseline Credit Assessment, affirmed b3

....Short-term Counterparty Risk Assessment, affirmed NP(cr)

....Long-term Counterparty Risk Assessment, affirmed B2(cr)

....Short-term Counterparty Risk Ratings, affirmed NP

....Long-term Counterparty Risk Ratings, affirmed B2

....Long-term Bank Deposits, affirmed B3, Outlook Changed to Stable from Negative

....Short-term Bank Deposits, affirmed NP

..Outlook Action:

....Outlook Changed to Stable from Negative

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks published in August 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Moscow, Russia, Maritime Bank reported -- at 30 June 2018 - total assets of RUB12.5 billion and total shareholders' equity of RUB2.1 billion, according to its unaudited financial statements prepared under IFRS. Maritime Bank's net IFRS profit for the first six months of 2018 was RUB147 million; the bank's IFRS profit in 2017 was RUB184 million.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Olga Ulyanova
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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​​​​
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