The rating downgrade and the outlook revision were motivated by a number of negative trends in the Bank's performance. In particular, the quality of loan portfolio has worsened, arrears on retail and corporate loans increasing since the previous rating revision to RUB 371 million from RUB 196 million as of November 1, 2015. On March 1, 2016, the share of overdue loans in the Bank's loan portfolio reached 12.6%.

This complication had an impact on the level of provisions: in the period under review, the Bank increased the amount of provisions for possible losses by 177%, which resulted in a negative financial result. For the 2-month period in 2016, the rated Bank posted a loss of RUB 487 million.

As a result, equity capital of Bank of Development of Technologies decreased by 39% against the start of 2016 to RUB 881 million as of the last reporting date. We regard the sharp deterioration in capital adequacy ratios as a risk factor for the Bank. In particular, the core capital adequacy ratio (N1.2) decreased from 15.5% to 7.6% in January, the minimum level set by the regulatory authority being 6%.

Another point of concern is a notable (-70%) reduction in balances of corporate deposits in January-February 2016 to RUB 492 million at the start of March.

AK&M Rating Agency assigned a credit rating to Bank of Development of Technologies for the first time on August 5, 2009. The last rating action in relation to the Bank was taken on November 18, 2015. All rating action announcements are available on the akmrating.ru website.

For estimation purposes, we completely rely on the reliability of information provided by the Client. 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.

The rating assignment is based on the monitoring results of the current credit rating assigned to Bank of Development of Technologies and the Credit Rating Methodology for Banks and their Debt Instruments rev. November 27, 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. 

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