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Russia-Based CentroCredit Bank Upgraded To 'B/B' On Stronger Capitalization; Outlook Stable

November 20, 2012 | Standard & Poor's

--Standard & Poor's Ratings Services said today it had raised its long- and short-term counterparty credit ratings on Russia-based CentroCredit Bank JSC to 'B/B' from 'B-/C' and its national scale rating to 'ruA-' from 'ruBBB-'. The outlook is stable.

The upgrade reflects our view that CentroCredit Bank's risk-adjusted capital (RAC) ratio, before adjustments for diversification, would remain comfortably above 15% over the next 18 months, supported by good internal profit generation and low growth. We understand the bank's shareholders do not plan any capital injections in the medium term. The amount the bank pays in annual dividends equals the amount of dividends it receives from investments.

CentroCredit Bank's earnings are volatile and dependent on the trading volume and performance of major Russian stock indexes. About 60% of its operating revenues came from market-sensitive income (mostly related to securities holding and trading) during the first nine months of 2012 under Russian accounting standards. The volume of securities trading and margins has been declining over the past 18 months, reducing the bank's profit generation. Nevertheless, in the first nine months of this year, CentroCredit Bank achieved Russian ruble RUB2.6 billion (about $87 million) in profit under Russian accounting standards.

Our ratings on CentroCredit Bank reflect its anchor of 'bb', as well as its "weak" business position, "very strong" capital and earnings, "weak" risk position, "below average" funding, and "moderate" liquidity, as our criteria define these terms. The stand-alone credit profile is 'b'.

The stable outlook reflects our opinion that CentroCredit Bank's business and financial profiles will remain stable over the next 12-24 months. We expect the bank to maintain very strong capitalization over the medium term, supported by good internal profit generation.

We could raise the ratings if the bank reduced its reliance on market-sensitive and volatile income and demonstrated better business diversification. Development of a larger and more diverse depositor base would be positive for the ratings.

We could lower the ratings if faster-than-expected growth or lower-than-expected profitability put a strain on the bank's capitalization, reducing our forecast RAC ratio before adjustments for diversification to lower than 15%.

Company: CentroCredit Bank

Full company nameThe CentroCredit Joint Stock Commercial Bank
Country of riskRussia
Country of registrationRussia
IndustryBanks

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