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I AGREE
12 Dec 2018
London, 12 December 2018 -- Moody's Investors Service ("Moody's") today upgraded
Bank Uralsky Financial House's (UralFD) Baseline Credit Assessment
(BCA) and adjusted BCA to b2 from b3, its long-term local
and foreign currency deposit ratings to B2 from B3, long-term
Counterparty Risk Assessment (CR Assessment) to B1(cr) from B2(cr),
and long-term Counterparty Risk Ratings (CRR) to B1 from B2.
The outlook on the long-term deposit ratings changed to stable
from positive.
The rating agency also affirmed the bank's short-term local and
foreign currency deposit ratings and CRRs of Not Prime and its short-term
CR Assessment of Not Prime(cr).
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
The BCA upgrade to b2 from b3 reflects recent improvements in UralFD's
financial performance, in particular, its net financial result
and capital adequacy, which Moody's expects to remain good and sustained
in the long term and commensurate with those of B2-rated peers.
The bank posted robust net financial result of RUB320 million in 2017
well above RUB36 million a year before amid strong net interest margin
(5.3%), declined provisioning charges (2.7%
of average gross loans) and material trading gains from securities of
RUB221 million.
For the first nine months of 2018 the bank reported net income of RUB91
million, which translates into 0.5% annualized return
on average assets compared with 1.5% in 2017 and 0.2%
in 2015-16. The recent net financial result was distorted
by additional provisioning charges incurred in Q1-Q2 2018 following
implementation of IFRS 9 accounting standard. Barring material
external shocks, the rating agency expects that UralFD's profitability
in the next 12-18 months will be supported by its healthy net interest
margin (4.9% over the first nine months of 2018),
good pre-provision profitability (2.7% of average
assets) as well as normalized credit costs.
The rating action also reflects UralFD's strengthened capital buffers.
As of 30 September 2018, the bank's tangible common equity
increased to 12.9% of total assets compared with 11.2%
at year-end 2017 and 10.4% at year-end 2016.
Moody's expects somewhat improvement next year thanks to internal capital
generation amid modest loan book expansion.
Following work-out of legacy loans and write-offs the bank
improved its asset quality while the problem loan ratio declined to 15.0%
at year-end 2017 from 17.8% a year before.
As of 30 September 2018 following adoption of IFRS 9 the bank reported
problem loans (defined as stage 3 lending) at 17.6% of gross
loans, along with sufficient problem loan coverage at 84%.
The rating agency believes that legacy problem loans have crystallized
and expects a steady decline of problem loan ratio in the next 12-18
months.
As of 30 September 2018 the bank reported liquid cushion at about 30%
of total assets. Its funding structure reflects high reliance on
customer deposits, which accounted for around 96% of total
liabilities at the end of September 2018. UralFD's funding
and liquidity profiles benefit from its established deposit-taking
franchise, which provides the bank with a granular and stable funding
source. Moody's expects UralFD's liquidity profile to remain healthy
over the next 12-18 months.
WHAT COULD MOVE THE RATINGS UP/DOWN
A sustained track record of improved asset quality along with solid profitability
could lead to an upgrade of UralFD's BCA and long-term ratings
or the outlook change to positive, provided there is no significant
deterioration in capital adequacy.
The bank's BCA and deposit ratings could be downgraded, or
the outlook on its long-term deposit ratings could be revised to
negative from stable if it fails to generate sustainable positive net
financial result or its asset quality or capital adequacy remarkably deteriorates.
LIST OF AFFECTED RATINGS
Issuer: Bank Uralsky Financial House
Upgrades:
....LT Bank Deposits , Upgraded to B2
from B3, Outlook Changed to Stable from Positive
....Adjusted Baseline Credit Assessment,
Upgraded to b2 from b3
....Baseline Credit Assessment, Upgraded
to b2 from b3
....LT Counterparty Risk Assessment,
Upgraded to B1(cr) from B2(cr)
....LT Counterparty Risk Rating, Upgraded
to B1 from B2
Affirmations:
....ST Bank Deposits, Affirmed NP
....ST Counterparty Risk Rating, Affirmed
NP
....ST Counterparty Risk Assessment,
Affirmed NP(cr)
Outlook Action:
....Outlook Changed to Stable from Positive
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.
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.
Petr Paklin
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
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.
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