London, 29 November 2016 -- Moody's Investors Service has today changed its outlook to positive from
negative on NBD Bank's long-term local and foreign-currency
deposit ratings, affirming the bank's B1 deposit ratings,
its b1 Baseline Credit Assessment (BCA) and adjusted BCA, Ba3(cr)/Not-Prime(cr)
Counterparty Risk (CR) Assessment, and the Not-Prime short-term
rating.
The rating agency also changed its outlook to positive from stable on
Metkombank's long-term local and foreign-currency
deposit ratings, affirming the bank's B3 deposit ratings,
its b3 BCA and adjusted BCA, B2(cr)/Not-Prime(cr) CR Assessment,
and the Not-Prime short-term rating.
A list of affected ratings can be found at the end of this press release.
RATINGS RATIONALE
NBD Bank
Moody's previous concerns regarding the potential deterioration
of NBD Bank's asset quality, given its focus on the relatively
high-risk segment of small and medium-sized enterprises
(SMEs), have eased now that the operating environment in Russia
has become more benign and the bank's problem loan ratio has remained
stable at approximately 13% over the last three quarters.
The positive outlook on NBD Bank's B1 long-term deposit ratings
acknowledges the bank's robust financial fundamentals and the potential
for a higher BCA and rating. NBD consistently reports strong profitability,
with recurrent pre-provision income at 3-4% and a
net interest margin at 5-6%. The bank has a solid
capital buffer (Basel I Tier 1 of 22.3%), which strengthened
as a result of the recent loan book contraction, in line with the
market trend. Its funding and liquidity profile is sound,
with the dependence on wholesale funding significantly reduced and unencumbered
liquid assets covering more than 50% of total liabilities.
Metkombank
The positive outlook on Metkombank's ratings was prompted by the RUB12
billion capital injection the bank received from its shareholders in June
2016. Following the injection, which almost tripled Metkombank's
capital, its regulatory Tier 1 ratio (N1.2) and total capital
adequacy ratio (N1.0) stood at 31.9% and 36.1%,
respectively, as of 1 November 2016. The capital increase
has also significantly improved the bank's position in terms of
credit concentration, as measured by the ratio of its largest 20
credit exposures relative to equity, which decreased to 101%
as of H1 2016 from approximately 250% as of year-end 2015.
The positive outlook also acknowledges Metkombank's strong financial
metrics relative to its current rating, and its demonstrated resilience
to the economic and banking crises of 2008-2009 and 2014-2015.
The bank has stayed adequately capitalized and profitable (with the exception
of 2009). Metkombank's credit profile is further underpinned
by its shareholders' track record of providing substantial capital
support to the bank in 2008, 2009 and 2016.
The key sources of uncertainty for Metkombank currently stem from (1)
its recent consolidation of the failed Econombank (not rated), which
will be first included in the bank's IFRS reports in Q3 2016,
and (2) the lack of clarity with respect to the details of the Central
Bank's proposed new regulations on credit concentration and related-party
lending, which are due to come into effect on 1 January 2017 and
will have an impact on the bank's lending policy and asset-growth
potential.
WHAT COULD MOVE THE RATINGS UP/DOWN
The ratings of NBD Bank and/or Metkombank could be upgraded if the banks
sustain the recent improvements in their capital adequacy metrics,
and in the case of Metkombank, maintain lower credit concentration
levels, while continuing to demonstrate financial performance superior
to their respective rating levels.
Negative pressure on the ratings is unlikely in the next 12-18
months, as indicated by the positive outlooks. However,
the ratings could be downgraded if the banks' risk absorption capacity
and financial fundamentals erode beyond Moody's current expectations.
LIST OF AFFECTED RATINGS
Affirmations:
Issuer: Metkombank
....LT Bank Deposits (Local & Foreign
Currency), Affirmed B3, Outlook, Changed To Positive
From Stable
....ST Bank Deposits (Local & Foreign
Currency), Affirmed NP
....Adjusted Baseline Credit Assessment,
Affirmed b3
....Baseline Credit Assessment, Affirmed
b3
....LT Counterparty Risk Assessment,
Affirmed B2(cr)
....ST Counterparty Risk Assessment,
Affirmed NP(cr)
Issuer: NBD Bank
....LT Bank Deposits (Local & Foreign
Currency), Affirmed B1, Outlook, Changed To Positive
From Negative
....ST Bank Deposits (Local & Foreign
Currency), Affirmed NP
....Adjusted Baseline Credit Assessment,
Affirmed b1
....Baseline Credit Assessment, Affirmed
b1
....LT Counterparty Risk Assessment,
Affirmed Ba3(cr)
....ST Counterparty Risk Assessment,
Affirmed NP(cr)
Outlook Actions:
Issuer: Metkombank
....Outlook, Changed To Positive From
Stable
Issuer: NBD Bank
....Outlook, Changed To Positive From
Negative
PRINICIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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.
Svetlana Pavlova
Asst Vice President - Analyst
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
SUBSCRIBERS: 44 20 7772 5454
Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454
