Press Releases / 15.06.2015
Press Release as of 15.06.2015
JSCB "Russian Trust Bank"
AK&M Rating Agency assigned a 'B++' tier 3 national scale credit rating to JSCB Russian Trust Bank, with a negative outlook.
The 'B++' rating indicates that JSCB Russian Trust Bank qualifies as a sufficiently creditworthy borrower. The risk of a delay in meeting obligations is moderate, the full or partial debt restructuring risk is insignificant.
JSCB Russian Trust Bank is a small-scale Russian credit institution headquartered in Moscow, with a loan desk in St. Petersburg. The bank provides all types of services involving Russian rubles and foreign currencies to legal entities and individuals. JSCB Russian Trust Bank ranks in the 300-400 range among Russian banks in terms of asset size, in the 400-500 range in terms of equity capital.
The Bank's credit rating is essentially supported by the growing key balance sheet performance indicators, the retail funding base stability and the low cost of debt.
The Bank's assets and liabilities improved in the first quarter of 2015. Liabilities of JSCB Russian Trust Bank increased by 9.8% resulting from an inflow of retail and corporate deposits (+43.3% and +10.4%, respectively). Assets of the Bank grew by 7.4% due to an increase of cash funds, deposits with the Central Bank of Russia and net loans receivable.
The Bank's portfolio of retail deposits is traditionally the key funding source for the Bank accounting for 72.1% of its liabilities as of April 1, 2015. Over the 12-month period starting from April 1, 2014, private deposits never went down below RUB 2 billion; for three months of 2015, the Bank's retail deposit portfolio increased by RUB 285 million reaching RUB 3 billion at the end of the reporting period.
We regard the fairly low cost of funding as a positive rating driver for JSCB Russian Trust Bank. In 2014-2015, average cost of borrowing did not exceed 7%. Our review of weighted average interest rates revealed a comfortable interest margin indicating that the Bank's interest policy in terms of lending and deposit operations is well-balanced. At the end of Q1 2015, the Bank's interest incomes exceeded its interest expense 2.6 times.
The negative outlook on the rating reflects the weaker key ratios, namely, the capital adequacy ratio (N1.0), the acid test and current liquidity ratios (N2 and N3). In the period under review, these ratios looked down approaching their respective minimum acceptable thresholds. In particular, as of May 1, 2015, the Bank's equity capital adequacy ratio dropped to 10.7%, N2 and N3 liquidity ratios to 19.8% and 53.9%, respectively.
The Bank's assets and liabilities are imbalanced in terms of maturity. Liabilities are dominated by borrowings maturing in 1 day, whereas most of the assets mature in the medium or long term. This imbalance certainly affects the Bank's liquidity ratios which repeatedly approached the limits set by the Central Bank of Russia in 2014-2015.
Another rating constraint, in AK&M Rating Agency's view, is the Bank's negative profitability and a high percentage of overdue debt.
The Bank's earnings and expenses were subject to substantial volatility in 2011-2014. The highest growth rate was in 2014 when the Bank increased incomes by 2.6 times (RUB 2,975.5 million), expenses 2.8 times (RUB 3,101.9 million). With the growth of expenses outstripping the income growth rate both in absolute and relative terms, the Bank faced a reduction in profits in 2014 and posted a loss of RUB 44.3 million in the first quarter of 2015. The reason for the higher expenses was the growing volume and negative revaluation of FX transactions. We also note the high relative weight of these components in the incomes and expenses of JSCB Russian Trust Bank (77.3% and 84.4%, respectively), the gap between which makes the Bank's overall financial result.
The upward overdue debt trend persisting in 2014-2015 also exerts pressure on the Bank's rating. Since the start of 2014, overdue debt to the Bank soared by RUB 262 million (5 times) reaching RUB 322.9 million as of the last reporting date (7.6% of the loan portfolio, against 4.5% on average in Russia's banking sector).
Our review of the Bank's 30 largest borrowers revealed a relatively weak loan portfolio. Loans with payment delays accounted for 1.2%, loans restructured in the period under review for 8.7% of the loan portfolio. Furthermore, the Bank's credit exposure diversification is rather poor, with clients engaged in the wholesale trade accounting for 32.9% of the loans receivable. The weak loan portfolio results in a worse N7 ratio (maximum amount of major credit risks) reaching the highest level of 750.4% on May 1, 2015.
Bank name in English: JSCB "Russian Trust Bank".
JSCB Russian Trust Bank has been operating in the market of banking services since 1998. The Bank of Russia assigned it registration no. 1139 as of December 10, 1990. The Bank possesses a license to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of March 13, 2012 and a license to accept ruble-denominated money deposits from individuals as of March 13, 2012. The Bank has been a member of Russia's deposit insurance system since October 14, 2004, DIS registration no. 70.
This press release is based on the Statement of assignment of a credit rating to JSCB Russian Trust Bank and the Credit Rating Methodology for Banks and their Debt Instruments.
The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Bank's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.
AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
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) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.
AK&M Rating Agency
Ul. Gubkina 3, Moscow, Russia
Phone: (495 916-70-30,
Fax: (499 132-69-18.