Press Releases / 09.09.2015
Press Release as of 09.09.2015
AK&M Rating Agency has affirmed the national scale credit rating of PAO IntechBank (license no. 2705) at 'A', tier 3, maintaining the negative outlook.
The 'A' rating indicates that PAO IntechBank qualifies as a highly creditworthy borrower. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. August 14, 2015.
PAO IntechBank is a medium-sized Russian credit institution in terms of the amount of business. Apart from the Headquarters, the Bank's branch network comprises 3 branches, 16 satellite offices and 4 stand-alone cash desks. The bank is operating in two regions of the Russian Federation: the Republic of Tatarstan and Moscow. The bank provides all types of services involving Russian rubles and foreign currencies to legal entities and individuals. PAO IntechBank ranks in the 100-200 range among Russian banks in terms of assets and equity capital.
The credit rating is essentially supported by the growing key balance sheet metrics, the relatively low contribution of major depositors to the funding base, the low percentage of loan arrears.
AK&M Rating Agency regards the steady and growing private deposits, a key source of funding for the Bank, as a positive rating driver. Over the year since our previous review (July 1, 2014), the bank gradually increased private deposits by 32.1% to RUB 12.6 billion. The amount of corporate deposits increased by 22.9%.
At the same time, the current level of liabilities indicates the low dependence on major clients. The maximum share of liabilities attributable to one group of depositors is less than 5%.
The rated Bank mainly used the borrowed capital to expand the loan portfolio (+22.4%). The quality of loans receivable has not undergone notable structural changes: loans of quality grades 1 and 2 account for 41.7% and 42.9% of the loan portfolio, respectively. The share of problem and non-performing loans is 5.5% against 7.4% on average in Russia's banking sector.
Another positive signal is the low percentage of loan arrears. As of August 1, 2015, the share of overdue loans in the Bank's loan portfolio was 1.0%, far below the average percentage in Russia's banking sector (5.2%).
Therefore, over the period from July 1, 2014 to July 1, 2015, the credit institution's assets and liabilities grew by 25.7% and 28.1%, respectively, resulting from an increase in their main constituents.
It should be noted that the equity of PAO IntechBank has also improved on account of subordinated facilities raised in July. As a whole, the Bank's equity increased by 23.9% since the start of the year, which caused positive changes in the capital adequacy ratio (from 11% to 12.6% in the last month).
While appreciating the strong points in the activity of PAO IntechBank, we reasonably maintain a negative outlook on the rating, given the Bank's inability to improve the share of highly liquid assets, the high percentage of miscellaneous assets, a reduction in net revenues in the first half of 2015 and the growth of interest expenses outstripping the interest income growth rate.
In particular, the share of highly liquid assets is 5.8% of the total asset portfolio, which is fairly low compared with the average percentage in Russia's banking sector (ca. 9%).
Miscellaneous assets, mostly consisting of shares in a closed-end mutual fund under discretionary management and receivables on other transactions make the second biggest contribution to total assets (10%). Given that we regard such assets to be of poor quality, their substantial percentage constrains the Bank's rating.
This year, assets held in trust have ceased to generate revenues, with the result that aggregate net incomes decreased by 11% to RUB 384.4 million in the first half of 2015, despite higher incomes from other sources.
The interest costs of PAO IntechBank are growing faster than interest incomes, which AK&M Rating Agency believes to be a risk factor. In particular, the Bank's interest expenses increased by 32.7% in 2014, by 103.8% in the first half of 2015 against a smaller increase in interest incomes for the same periods (+29.4% and 78.4%, respectively. As a result, the interest income to interest cost ratio decreased to 1.1.
Full Bank name: Public Joint Stock Company «IntechBank»
Short name: PAO «IntechBank»
PAO IntechBank has been operating in the market of banking services since 1994. The Bank possesses general banking license no. 2705 as of February 21, 1994 issued by the Central Bank of the Russian Federation. The bank possesses a general banking license as of April 10, 2015 and a license for accepting deposits and placement of precious metals issued on April 10, 2015. The Bank has been a member of the deposit insurance system since January 20, 2005, reg. no. 487.
AK&M Rating Agency assigned a credit rating to PAO IntechBank for the first time on June 17, 2010. The last rating action in relation to the Bank was taken on June 25, 2015. All rating action announcements are available on the akmrating.ru website.
The rating is valid until September 2016. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Bank's creditworthiness are revealed.
For estimation purposes, we completely rely on the reliability of information provided by the Bank. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.
This press release is based on the Statement of assignment of a credit rating to PAO IntechBank. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. August 14, 2015.
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.
CJSC AK&M Rating Agency
Ul. Gubkina 3, Moscow, Russia
Phone no.: (495 916-70-30, fax: (499 132-69-18