Press Releases / 16.10.2015
Press Release as of 16.10.2015
PETERSBURG'S CITY BANK, inc
AK&M Rating Agency has affirmed the national scale credit rating of PETERSBURG'S CITY BANK, inc (lic. no. 2982) at 'A', tier 3, with a stable outlook.
The 'A' rating indicates that PETERSBURG'S CITY BANK, inc 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.
PETERSBURG'S CITY BANK, inc is a medium-sized credit institution in terms of equity with a fairly small amount of business. The Bank is registered in St. Petersburg. Being focused on a narrow circle of privileged clients, PETERSBURG'S CITY BANK does not have structural units apart from the head office. The Bank's activity profile includes raising private and corporate deposits, serving and lending to corporate clients.
The credit rating is essentially supported by the Bank's strong loan portfolio, high level and adequacy of equity capital, and profitable operations.
Most of the Bank's assets come from its loan portfolio which the Bank maintains within acceptable quality limits. The bulk of the loans are of quality grades 1 and 2, their combined share being 98.7% of the loan book; problem and non-performing loans are almost absent. The overdue debt percentage is 0.03%, which is far below the average level in the banking sector of Russia (5.2% as of August 1, 2015).
The Bank's equity capital accounting for 60% of its liabilities is mainly composed of its authorized capital and retained earnings. The Tier 1 capital level reaches approximately 97%, the share of authorized capital is also considerable (30.5%). The equity capital adequacy of PETERSBURG'S CITY BANK, inc is extraordinarily high: as of September 1, 2015, the N1.0 ratio was 54.95% indicating underperformance in raising and investing capital. At the same time, the high adequacy and healthy structure of the equity capital dominating the Bank's liabilities actually guarantee the full performance of all obligations to clients, which puts the Bank in a good position for business expansion.
The rated Bank's operations are profitable. In 2015, PETERSBURG'S CITY BANK earned RUB 101.7 million in 6-month net profit, while its return ratios exceeded the average levels. In particular, the return on assets (ROA) ratio was 2.6%, the return on equity (ROE) ratio was 3.9% against 0.3% and 2.4% on average, respectively, in the banking system of Russia. Among other things, this strong financial performance resulted from a steady flow of net interest incomes owing to the Bank's well-balanced interest policy pursued in lending and deposit operations. In the first half of 2015, the Bank's interest incomes exceeded its interest expense almost 6 times.
At the same time, the poor diversification of liabilities across funding sources and maturities, the substantial dependence on major clients and the shrinking net incomes are putting pressure on the rating.
One of the key rating constraints is the weak diversification of borrowings across funding sources and maturities. The Bank's liabilities are almost entirely composed of customer deposits and miscellaneous obligations, other funding sources are absent. It should also be noted that the amount of customer deposits decreased by 13.2% over the period from July 1, 2014 to July 1, 2015.
The breakdown of liabilities by maturity indicates the preponderance of short-term liabilities, which constrains the Bank's lending power. The percentage of demand and overnight obligations reaches 77% while long-term borrowings are absent.
In AK&M Rating Agency's view, the high funding base concentration within the group of major depositors. In particular, as of September 1, 2015, 44.2% of the Bank's total liabilities were attributable to the biggest depositor, while 10 major depositors accounted for 75.2% of the Bank's total liabilities. This concentration of obligations indicates that the Bank is highly dependent on major clients, which affects the stability of its funding system.
The Bank's net incomes are on a negative trend (-13.5% in 2014, -78.6% in the first half of 2015). This reduction mainly resulted from a decline in miscellaneous incomes derived from transactions not directly related to banking activity and qualifying as non-systemic factors. It should however be noted that the Bank's net incomes stayed fairly well-structured at the end of the first half of 2015, the combined share of interest, fee & commission incomes being 95.2%.
Full Bank Name: PETERSBURG`S CITY BANK, INCORPORATED
Short name: PETERSBURG'S CITY BANK, inc.
PETERSBURG'S CITY BANK, inc. has been operating in the market of banking services since 1994. The Bank was registered by the Bank of Russia under reg. no. 2982 as of July 19, 1994. The Bank possesses a license to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) and a license to accept Russian ruble and foreign currency-denominated money deposits from individuals as of December 17, 2014. The Bank has been a member of the deposit insurance system since October 14, 2004, DIS registration no. 82. The Bank's ultimate beneficiaries are Andrei and Olga Golubev.
AK&M Rating Agency assigned a credit rating to PETERSBURG'S CITY BANK, inc on November 21, 2014. All rating action announcements are available on the akmrating.ru website.
The rating is valid until October 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 PETERSBURG'S CITY BANK, inc. 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 no.: (499) 132-69-18.