Russian rating agency RAEX (Expert RA) has lowered its creditworthiness rating on Moscow-based Premier Credit Bank to B, with a negative outlook. The rating was removed from rating watch, and the bank was previously rated at B+, with a negative outlook.
The rating downgrade was in particular driven by a 20% decline in the bank's own funds compared to the highest reached from December 1, 2015 through December 1, 2016 due to a steep increase in current-year losses amid the deteriorating credit portfolio quality, RAEX said in a press release. Moreover, the agency is downbeat about frequent ownership and executive shakeups (over the past 12 months all the bank's shareholders have changed, and from September through October 2016 the list of beneficial owners whose stakes in the bank's capital exceed 10% was revised several times).
Other negative factors also include high concentration of active operations on objects associated with the big credit risk (as of December 1, 2016 big credit risks to assets, net of provisions, equaled 60.5%), poor sectorial diversification of the corporate credit portfolio (borrowers from construction and real estate sectors account for around 30% of the portfolio). The rating is pressured by a modest cushion of high-liquidity assets with regard to potentially big payments, concentration of the resource base on big creditors (the shares of funds falling to ten biggest creditors / groups of creditors taking into account the Bank of Russia account for 18.2% of gross liabilities as of early December), low rates of return taking no account of income derived from property provided for free (within 12 months from October 1, 2016 ROE equaled -4.8%, and ROA came in at -1.1%).
The rating is backed by the bank's high capital adequacy ratios (N1.0 stood at 20.8% as of early December, while N1.1 and N1.2 are equal to 20.8%), acceptable coverage of the corporate and retail credit portfolios (as of December 1, 2016 the credit portfolio was secured, including by securities, sureties and guarantees, by 292.8%), and also by good coverage of operating expenses by net interest income and net commission income (131.5% for July-September 2016).