London, 23 May 2019 -- Moody's Investors Service ("Moody's") today upgraded
the baseline credit assessment (BCA) of PJSC ROSBANK (Rosbank) to ba2
from ba3, adjusted BCA to baa3 from ba1, deposit ratings to
Baa3/Prime-3 from Ba1/Not-Prime, counterparty risk
ratings (CRRs) to Baa2/Prime-2 from Baa3/Prime-3 as well
as senior unsecured rating and senior unsecured credit facility to Baa3
from Ba1. Concurrently, Moody's has upgraded its the Counterparty
Risk Assessment (CR Assessment) to Baa2(cr)/Prime-2(cr) from Baa3(cr)/Prime-3(cr).
The outlook on the long-term debt and deposit ratings remains stable.
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
The upgrade of ratings was driven by improvement in profitability and
asset quality indicators as well as funding structure, which now
benefits from lower reliance on wholesale funding. In accordance
with our Joint Default Analysis, Baa3 global local-currency
deposit rating continues to incorporate our assessment of a high probability
of support from the bank's majority shareholder Societe Generale (SocGen,
deposits A1/A1 stable, baa2), which results in a two-notch
rating uplift from Rosbank's BCA of ba2.
Rosbank has demonstrated a track record of improved performance over the
recent years - its return on average assets ratio has improved
and exceeded 1% since 2017, compared to 0.4%
in 2016. The positive impact on profitability was a result of lower
credit costs, improved efficiency, reduced cost of funding
as well as stronger fee and commission income generation. Moody's
expects the operating profitability to continue improving in the next
12-18 months, driven by these factors.
Rosbank's overall problem loans declined to 6% of the gross loan
book (including finance leases) as of the end of 2018 from 9% at
year-end 2017. The improvement was mainly due to workout
of problem loans and growth in the loan book. The bank's loan-loss
reserves covered almost 100% of problem loans as of the end of
2018 (76% as of 31 December 2017), reflecting Rosbank's
prudent provisioning policy. Moody's expects the problem
loan ratio to continue declining over the next 12-18 months,
driven by ongoing workout of problem loans and a steady growth of the
loan portfolio.
The bank has significantly reduced its reliance on wholesale funding,
which accounted for 17% of tangible banking assets at end-2018,
down from 26% two years earlier. Also, the group's
gross loan-to-deposit ratio declined to 94% as of
31 December 2018, from 103% at end-2017.
HIGH AFFILIATE SUPPORT
High support assumptions from SocGen are based on almost 100% ownership
of the bank as well as its strategic importance for the group as one of
the core subsidiaries in the contest of growth strategy for SocGen.
MODERATE GOVERNMENT SUPPORT
Moderate support assumptions from the Russian government are based on
the bank's status as one of the 11 systemically important banks
in Russia, which makes Rosbank subject to stricter capital and liquidity
requirements and additional supervision by the regulator. In addition,
the bank has immediate access to committed liquidity lines from the Central
Bank of Russia, in case of need.
STABLE OUTLOOK
The stable outlook on the long-term debt and deposit ratings reflects
Moody's expectations that expected improvement in key credit metrics (e.g.
asset quality and profitability) will unlikely lead to rating upgrade
in the next 12-18 months.
WHAT COULD MOVE THE RATINGS UP/ DOWN
A sustainable improvement in the bank's profitability, coupled
with a reduction in problem loans, could result in upward pressure
on the bank's BCA. Erosion of risk-absorption capacity and
financial fundamentals if the country's macroeconomic conditions
deteriorate substantially from current levels could lead to a downward
pressure on the ratings, although the likelihood of this scenario
is low. Our belief that the strategic importance of Russian operations
to SocGen is declining, leading to a reassessment of parental support
assumptions could lead to downgrade of long-term ratings.
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.
FULL LIST OF AFFECTED RATINGS
Issuer: PJSC ROSBANK
..Upgrades:
.... Adjusted Baseline Credit Assessment,
Upgraded to baa3 from ba1
.... Baseline Credit Assessment, Upgraded
to ba2 from ba3
....Senior Unsecured Bank Credit Facility,
Upgraded to Baa3 from Ba1, Outlook Remains Stable
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa3 from Ba1, Outlook Remains Stable
.... Long-term Counterparty Risk Assessment,
Upgraded to Baa2(cr) from Baa3(cr)
.... Short-term Counterparty Risk Assessment,
Upgraded to P-2(cr) from P-3(cr)
.... Long-term Counterparty Risk Rating,
Upgraded to Baa2 from Baa3
.... Short-term Counterparty Risk Rating,
Upgraded to P-2 from P-3
.... Long-term Bank Deposits,
Upgraded to Baa3 from Ba1, Outlook Remains Stable
.... Short-term Bank Deposits,
Upgraded to P-3 from NP
..Outlook Action:
....Outlook Remains Stable
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.
Vladlen Kuznetsov, CFA
Vice President - Senior 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
