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Global Credit Research - 18 Mar 2011
Outlook is stable
Moscow, March 18, 2011 -- Moody's Investors Service has upgraded the long-term local and
foreign currency deposit ratings of Russia-based GE Money Bank
CJSC (GEMB) to Ba2 from Ba3. At the same time, the bank's
Not Prime short-term local and foreign currency deposit ratings,
and an E+ bank financial strength rating (BFSR) were affirmed.
Concurrently, Moody's Interfax Rating Agency raised the bank's
long-term National Scale Rating (NSR) to Aa2.ru from Aa3.ru.
Moscow-based Moody's Interfax is majority owned by Moody's,
a leading global rating agency. The outlook on all ratings is stable,
while the NSR carries no specific outlook.
Moody's assessment is based on GEMB's publicly available unaudited
financial statements for 2010 prepared under Russian GAAP, as well
as the bank's non-public management reports for the same
year. Moody's parental support assumptions for GEMB are based on
a history of ownership, track record of support, and our discussions
with the management of GEMB and its parent - General Electric Capital
Corporation (GECC; Aa2/Stable).
The rating action is driven by the improvements in GEMB's stand-alone
credit profile. The bank's E+ BFSR, which now
translates into a Baseline Credit Assessment (BCA) of B1 compared to B2
previously, is supported by improvements in GEMB's asset quality,
profitability, and funding base. Other factors supporting
the upgrade include a stable capitalisation and improved financial efficiency.
At the same time, GEMB's BFSR remains constrained by the bank's
moderate commercial franchise and its exposure to high credit risk in
GEMB's asset quality improved in 2010, following a deterioration
in 2008-2009 due to the economic crisis and loss of employment
by borrowers. The bank's steps to improve asset quality produced
adequate results, and included lower loan approval rates and enhanced
collection procedures. The bank's problem loan ratio (overdue by
more than 90 days) decreased in 2010, from 3.2% in
2009, according to the information provided by management.
Loans written-off and sold decreased two times at YE2010,
compared to 18.5% of gross loans in 2009. Moody's
expects asset quality to improve further in 2011, as the bank's
loans that were originated in 2008-2009 have mostly matured and
new loan vintages appear to be of good quality.
GEMB achieved a very sound 8% ROA for 2010, as improved asset
quality allowed the bank to channel less of its pre-provision income
into loan loss provisions: 22% in 2010, compared to
a very high 105% in 2009. Moody's expects the bank
to maintain a good profitability in 2011, as the cost of risk has
stabilised at a five-year low of 3%. The bank maintains
a good recurring earning power (pre-provision income / average
assets): 13% at YE2010, a level that is three times
higher than the sector average. Core profitability is supported
by the wide net interest margin of 21% at YE2010.
The bank is making progress in funding diversification, as the share
of customer deposits increased to around one-third of liabilities
at YE2010, from 20% in 2009. GEMB is predominantly
funded by the parent: around 70% of funding was provided
by GECC at YE2010, and as such is considered stable. The
bank's capitalisation is sound, with 22.6% total CAR
at YE2010 (Russian GAAP). Capitalisation was supported in 2010
by the bank's strong internal capital generation that allowed for
a 37% increase in the capital base. Capitalisation is expected
to remain strong, due to sound profitability and moderate growth
in risk assets in 2011.
Moody's notes that it sees a limited upward potential for GEMB's
stand-alone ratings in the medium term, as a higher rating
would require fundamental improvements that are difficult to achieve.
Those include, but not limited to, a much stronger commercial
franchise evidenced by the bank's market share, network and
product mix, and tangible diversification in liabilities which remain
dominated by parental funds.
GEMB's global local currency (GLC) deposit rating of Ba2 is based on the
bank's BCA of B1 and two notches of support from parent GECC. Moody's
expects a moderate probability of support to GEMB from GECC in case of
need, based on the former's full integration into the parent's operations,
limited size, and reputation considerations. The rating agency
notes that GECC is divesting or decreasing some of its non-core
businesses, including the consumer segment
that comprises GEMB. We do not incorporate any probability of systemic
support from Russia in GEMB's ratings, because the bank has limited
The principal methodologies used in this rating were Bank Financial Strength
Ratings: Global Methodology published in February 2007, and
Incorporation of Joint-Default Analysis into Moody's Bank Ratings:
A Refined Methodology published in March 2007.
Moody's National Scale Ratings (NSRs) are intended as relative measures
of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale ratings in that they are not globally
comparable with the full universe of Moody's rated entities, but
only with NSRs for other rated debt issues and issuers within the same
country. NSRs are designated by a ".nn" country
modifier signifying the relevant country, as in ".mx"
for Mexico. For further information on Moody's approach to national
scale ratings, please refer to Moody's Rating Implementation Guidance
published in August 2010 entitled "Mapping Moody's National Scale
Ratings to Global Scale Ratings."
(Starting November1, 2010 the following text will be added
to Press Releases where Russian NSR Ratings are referenced. Please
note this is not a regulatory requirement)
Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are
intended as relative measures of creditworthiness among debt issues and
issuers within a country, enabling market participants to better
differentiate relative risks. NSRs differ from Moody's global scale
ratings in that they are not globally comparable with the full universe
of Moody's rated entities, but only with NSRs for other rated debt
issues and issuers within the same country. NSRs are designated
by a ".nn" country modifier signifying the relevant
country, as in ".ru" for Russia. For further
information on Moody's approach to national scale ratings, please
refer to Moody's Rating Implementation Guidance published in August 2010
entitled "Mapping Moody's National Scale Ratings to Global Scale
ABOUT MOODY'S AND MOODY'S INTERFAX
Moody's Interfax Rating Agency (MIRA) specializes in credit risk analysis
in Russia. MIRA is controlled by Moody's Investors Service,
a leading provider of credit ratings, research and analysis covering
debt instruments and securities in the global capital markets.
Moody's Investors Service is a subsidiary of Moody's Corporation (NYSE:
The previous rating action on GEMB was on July 05, 2010, when
Moody's has assigned its first-time global scale ratings to the
bank: a Ba3 long-term and Not Prime short-term local
and foreign currency deposit ratings, and an E+ BFSR.
Concurrently, Moody's Interfax Rating Agency assigned a Aa3.ru
long-term National Scale Rating (NSR) to the bank.
Headquartered in Moscow, GEMB is a consumer finance bank with assets
of RUB23 billion as at 31 December 2010. The bank operated through
around 40 offices and 100 kiosks in 10 Russian regions. GEMB is
fully owned by GECC, the financial arm of General Electric Corporation.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Financial Institutions Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Eastern Europe LLC
Moody's upgrades GE Money Bank to Ba2 (Russia)
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Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
No Related Data.
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