Press Releases / 03.04.2015
Press Release as of 03.04.2015
Guarantee Fund of Credit Support of the Republic of Mordovia
CJSC AK&M Rating Agency affirmed the guarantee institution rating of Guarantee Fund of Credit Support of the Republic of Mordovia (GFCS RM) on the national scale at 'A', tier 3, with a stable outlook.
The 'A' rating indicates that the Guarantee Fund of Credit Support of the Republic of Mordovia is a guarantee institution with a high degree of financial stability and a good level of SME assistance in the region. The full or partial default risk is low.
Autonomous institution 'Guarantee Fund of Credit Support of the Republic of Mordovia' was registered on March 19, 2009. Its core business is the provision of sureties for obligations of small and medium-sized businesses in the Republic of Mordovia.
The guarantee institution's rating is supported by the growing amount of sureties provided, the high guarantee capital multiple, and the good structure of loans for which the rated fund stands surety.
In 2014, the total amount of sureties provided by the Fund and the total amount of loans secured by them increased by 48.5% and 46.7%, respectively (by RUB 50 million and RUB 71.3 million in absolute terms) compared with the end of 2013.
The Fund’s guarantee capital multiple at the end of 2014 was 130.7%, an evidence of its high operational efficiency. However, this ratio decreased by 15.5 p.p. against the 2013 level in the wake of a shrinking surety portfolio, AK&M Rating Agency analysts say.
In the period under review, GFCS RM provided sureties for loans maturing in no more than three years, while loans with a tenor of up to 2 years account for almost 57% of its off-balance sheet liabilities, a fairly reasonable structure of loans, as the guarantee institution seeks to boost operating earnings and to cut risks arising from the borrowers’ possible defaults on their loan obligations.
At the same time, the Fund’s rating is constrained by the operating loss and the high share of payments related to surety commitments.
In 2013-2014, the Fund’s income was not enough to cover its expenditure (the loss reaching RUB 1.8 million as of January 1, 2015). However, we appreciate the positive effect of the measures taken by the Fund management team to cut expenditure in 2014: the uncovered expenses item was reduced 3.1 times against 2013.
Payments under surety contacts accounted for most of the Fund’s expenses (64%), although the amount of such payments in absolute terms decreased by 30% to RUB 13.1 million in the year under review compared with RUB 18.6 million in 2013. Since its inception, the Fund has undertaken 171 surety commitments and discharged 14 payment obligations to banks for a total amount of RUB 32 million. The Fund is taking measures to recover the loss through applicable recourse procedures, with RUB 2 million recovered as of December 31, 2014). The amount of payment obligations discharged reached 4.7% of the Fund’s total current surety portfolio. Meanwhile, arrears on loans to non-financial businesses reached 2.4% as of January 1, 2015 (according to the Central Bank of Russia’s data), which means that the Fund’s risk management system has weakened.
Autonomous institution 'Guarantee Fund of Credit Support of the Republic of Mordovia' was registered on March 19, 2009. Its sole founder is the government of the Republic of Mordovia.
Over its existence, the guarantee institution has concluded more than 171 surety agreements amounting to RUB 719.8 million, loans provided to SME businesses secured by the Fund exceeded Rub 1.09 billion. As of January 1, 2015, the guarantee institution's surety portfolio totaled RUB 274.7 million.
This press release is based on the Statement of assignment of a credit rating to the autonomous institution 'Guarantee Fund of Credit Support of the Republic of Mordovia' and the applicable Guarantee Institution Rating Methodology.
The rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.
CJSC AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
CJSC AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).
CJSC AK&M Rating Agency
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Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.