Russian rating agency RAEX (Expert RA) has downgraded its creditworthiness rating on Russtroybank to B++ (satisfactory level of creditworthiness). The developing outlook was assigned to the rating, which means the equal probability both of the rating being affirmed and revised over the medium term. The rating was also put on credit watch. Previously the bank was rated at A (high level of creditworthiness, Sublevel 3), with a stable outlook.
The key factor leading to the new rating was the bank's policy towards drawing long-term retail deposits at interest rates that are substantially higher than the basic rate of deposit returns based on CBR data. The agency thinks that longer term this would put heavy pressure on the bank's rates of profit and capital, which is assessed as a negative given the bank's modest cushion for capital liquidity ratios. Furthermore, the agency still points to the modest liquidity cushion, which adversely influences the rating amid heavy dependence of the bank's liabilities on retail deposits that can be subject to outflows.
The developing rating outlook and the 'under watch' status reflect elevated impairment risks of the biggest loans, and also uncertainty about stability of funds drawn from 'market' deposit holders. Moreover, the rating is still negative influenced by high concentration of active operations on businesses associated with the high credit risk and on loans granted to borrowers from the construction sector, low coverage of the credit portfolio, high immobilization of capital by assets and encumbrance of over 97% of the securities portfolio under repo transactions.
Among positive factors the agency highlighted high coverage of operating expenses by net interest income and net commission income, acceptable rates of return and moderately low concentration of drawn funds on the biggest creditors/groups of creditors. The rating is also backed by the low level of accepted currency risks and high liquidity of the securities portfolio.
