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Russia-Based OTKRITIE Bank Upgraded To 'B/B' And 'ruA-' On Improving Business Position; Outlook Stable

November 21, 2012 | Standard & Poor's

Primary Credit Analyst: Elena Romanova, Moscow, (7) 495-783-4091;
Secondary Contact: Irina Velieva, Moscow, (7) 495-783-4071;
Additional Contact: Financial Institutions Ratings Europe;

• Russia-based OTKRITIE Bank has completed operational integration with the banks it recently acquired, which has increased its franchise, client base, and network.
• We believe the bank's business position is stronger now than before, while control systems over the network of newly merged banks, as well as risk management and corporate governance practices, are being streamlined and improved.
• We are raising our long- and short- term ratings on OTKRITIE Bank to 'B/B' from 'B-/C'.
• The stable outlook reflects our anticipation of a continuous improvement of the bank's risk position within the next 12-18 months, backed by adequate risk management of the more diversified business. We do not expect the bank's liquidity position and capital standing to deteriorate materially within the next 12-18 months.

Standard & Poor's Ratings Services said today that it had raised its long-term counterparty credit rating on Russia-based OTKRITIE Bank to 'B' from 'B-' and the short-term counterparty credit rating to 'B' from 'C'. The outlook is stable.

At the same time, we raised the Russia national scale rating to 'ruA-' from 'ruBBB+'.

The upgrade reflects our opinion that OTKRITIE Bank has managed to complete its operational integration with banks it recently acquired, and should benefit from the increased franchise, client diversity, and network. We believe that risks related to the merger are mostly over. At the same time, we expect that the bank will further streamline and improve its control systems and risk management over the network of newly merged banks. For these reasons, we consider that OTKRITIE Bank's business diversity and client access is improving. We are therefore revising our assessment of OTKRITIE Bank's business position to "moderate" from "weak", as defined by our criteria.

The bank's stand-alone credit profile (SACP) is at 'b', and our assessment of other components of the SACP is unchanged. Our ratings on OTKRITIE Bank reflect the 'bb' anchor we use for commercial banks operating in Russia and the bank's "moderate" business position, "weak" capital and earnings, "moderate" risk position, "average" funding, and "adequate" liquidity. OTKRITIE Bank's SACP does not include any uplift for extraordinary external support, either from the bank's shareholders or the government.

The stable outlook reflects our view that, at least for the next 12 months, OTKRITIE Bank will focus on developing its new network and franchise and streamlining its network management practices and product lines. We expect that the bank will likely maintain a positive financial performance, improve its margins, and generate adequate revenues to maintain its capitalization.

We could take a positive rating action if the bank showed conservative growth rates over time and improved underwriting standards, leading to an improvement of its asset quality metrics. If the strengthened business position substantially helped the bank's earnings generation capacity to an extent that the RAC ratio would sustainably exceed 5%, it would also likely trigger an upgrade.

We could take a negative rating action if concentrations increased in the loan book or if the bank experienced an unexpected setback in executing its new strategy. This would impair the bank's asset quality and likely put pressure on the capital position. If such pressure lowered the RAC ratio to less than 3%, it could result in a negative rating action

Company: Bank OTKRITIE (doesn't exist)

Full company nameBank OTKRITIE
Country of riskRussia


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