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Moody's Interfax downgrades Rosdorbank's NSR to Baa3.ru

September 05, 2012 | Cbonds

Moscow, September 04, 2012 -- Moody's Interfax Rating Agency has today downgraded Rosdorbank's national scale rating (NSR) to Baa3.ru from Baa2.ru. NSRs carry no outlooks.

Today's rating action is based on Rosdorbank's audited financial statements for 2011 prepared under IFRS, and its unaudited results for the first half of 2012, prepared under Russian Accounting Standards (RAS).

Please see ratings tab on the issuer/entity page on moodys.com for information on Global Scale Rating.

RATINGS RATIONALE

According to Moody's Interfax, the downgrade of Rosdorbank's NSR to Baa3.ru from Baa2.ru reflects the rising levels of credit concentrations and weakening of the bank's capitalisation. The aggregate amount of the bank's top 20 credit exposures grew to 390% of total equity as of year-end 2011 from 344% as of year-end 2010, whilst the loans issued to the real estate and property construction sectors as a percentage of total equity doubled to 109% from 55% as of the respective reporting dates.

The substantial credit concentrations exposes Rosdorbank's performance to elevated credit risks which materialised in 2011-12 when two of the bank's largest borrowers operating in the construction sector slipped into a non-performing category. Although Rosdorbank's management expects good recovery for those two loans, Moody's Interfax notes that Rosdorbank's very high credit concentrations continues to render the bank vulnerable to further defaults of large borrowers. In 2011, Rosdorbank's total credit losses amounted to 2.5% of its average gross loan book, which triggered a net loss of US$2.1 million for that year.



Rosdorbank's statutory capital adequacy (N1) ratio was 11.75% as at 1 August 2012, which is just slightly above the 10% regulatory minimum requirement. Moody's Interfax notes that this capital cushion does not adequately provide for Rosdorbank's credit concentration risks, and might prove insufficient if there is any deterioration in the quality of one or two of the bank's other large loans.



Among the factors underpinning Rosdorbank's NSR, Moody's Interfax notes
(i) the bank's historically moderate exposure to related parties, which compares the bank favourably to its similarly rated peers (Rosdorbank's reported level of related-party loans stood at 25% of the bank's total equity as of year-end 2011), and (ii) Rosdorbank's relatively stable liquidity profile which benefits from a variety of funding instruments in addition to customer accounts, such as bilateral financing from the local and international development institutions, and which is further underpinned by a sufficiently high liquidity cushion.

Company: RosDorBank

Full company nameRussian joint-stock commercial roads Bank
Country of riskRussia
Country of registrationRussia
IndustryBanks

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