Russian rating agency RAEX (Expert RA) has lowered its credit rating on Regional Commercial Bank to B+ (quite low level of creditworthiness), with a negative rating outlook. The bank was earlier rated at B++ (satisfactory level of creditworthiness), with a negative outlook.
The rating action was driven by a reduction in the current liquidity ratio. "Fluctuations in N3 and the ratio's drop to the level close to the regulatory minimum in the conditions when the resource base depends on household funds make the bank's liquidity more vulnerable to the premature outflow of drawn funds," RAEX managing director for banking ratings Stanislav Volkov commented.
In addition, the agency expects the lender's liquidity to remain under pressure in the medium term as it is necessary to meet obligations of the biggest creditor. For this reason, the negative rating outlook was reiterated.
Among negative factors the agency still highlights high concentration of active operations on companies associated with the high credit risk (as of March 1, 2016 big credit risks to assets, net of provisions, equaled 68.5%), the limited range of additional liquidity sources and operating risks as the portion of cash in assets is maintained at a high level (8% as of March 1, 2016).
As for positive factors, the agency pointed to acceptable capital adequacy, high coverage of operating expenses by net interest income and commission income, and the resource base diversified by customers.