The credit rating of Joint Stock Company Commercial Bank «Lanta-Bank» (hereinafter, Lanta-Bank, or the Bank) is based on the Bank’s moderately low business profile, low capital adequacy and risk profile assessments, and the adequate funding and liquidity position. The credit rating also takes into account the shareholder’s ability to provide support, which is reflected in the addition of one notch to the standalone creditworthiness assessment (SCA). The Bank has low creditworthiness compared to other rated entities.
Lanta-Bank is a Moscow-based bank that ranks 163rd by size of equity among Russian banks and has a small network of offices. Despite its rather low market position, the Bank is one of the leaders of the precious metals and collectable coin market and is one of the main suppliers of precious metals for replenishing the Russian Federation’s foreign exchange reserves. In addition, Lanta-Bank actively places funds in foreign banks and finances SMEs by taking deposits, the majority of which come from related parties. The majority shareholders of the bank are the Dokuchayev family (which holds a more than 75% stake) and the companies in which they are the ultimate beneficiaries.
Key rating assessment factors
The Bank’s moderately low business profile assessment is based on the positions held by the Bank and the low assessment of its strategy. The quality of corporate governance corresponds with the scale of Lanta-Bank’s activities, and its main beneficiaries are also involved in managing the Bank. However, the Bank’s operating income is sufficiently highly diversified (the Herfindahl–Hirschman index stood at 0.2), mainly due to the significant share of revenues from precious metals transactions.
ACRA assesses Lanta-Bank’s capital position as critical, given the low capital adequacy ratios (the N1.2 ratio amounted to 9.2% as of April 1, 2021 and averaged 8.6% over the past 13 months, with the threshold at 6%) and the negative averaged capital generation ratio (ACGR), which is due to the Bank’s significant losses in 2019, mainly from the substantial creation of additional reverses for the loan portfolio. The Bank is capable of withstanding an increase in the cost of risk of around 200 bps without violating regulatory ratios. Operational efficiency is below average for the peer group of banks (over the past three years the CTI was 88% and the NIM was 3.8%).
The critical assessment of Lanta-Bank’s risk profile is based on the low quality of the loan portfolio, the share of problem and potentially problem debt, which amounted to 25.5% as of June 30, 2020 (coverage of reserves under IFRS is no higher than 40%), and the concentration on the ten largest groups of borrowers, which exceeded 40% of loans. Furthermore, the share of loans to companies operating in high-risk sectors amounted to 1.3x of common capital. In addition, the substantial volume of non-core assets on the Bank’s balance sheet (around two-thirds of common capital) and an enhanced volume of market risk, the level of which is volatile, have a negative impact on the risk profile assessment. A significant part of the Bank’s assets is made up of cash and its equivalents, including precious metals, and also claims on banks, the yield on which is minimal. The quality of the risk management system is assessed as satisfactory.
The adequate funding and liquidity position is based on the sufficient volume of liquid and highly liquid assets. The calculation of the short-term liquidity shortage indicator (SLSI) shows that Lanta-Bank has a liquidity surplus in ACRA’s base case and stress scenarios. The long-term liquidity shortage indicator (LLSI) equaled 78% as of June 30, 2020. In addition, the share of the largest group of creditors related to the Bank exceeded 40% of liabilities as of June 30, 2020, while the share of funds of the ten largest groups was around 85%. The concentration of the resource base on funding sources is heightened, with funds from individuals accounting for 57% of liabilities and funds from legal entities accounting for 41%.
ACRA has upgraded the SCA taking into account the probability of support from the shareholder. This adjustment takes into account the probability of S. Dokuchayev, who owns a 22% stake in GV Gold (Vysochaishy, PJSC), providing extraordinary support to the Bank. In accordance with the Methodology for Analyzing Rated Entities Associated with the State or a Group, the Bank’s credit rating has been increased by one notch relative to its SCA (ccc).
- The Dokuchayev family maintaining shareholder and operational control;
- Maintaining the current business model over the 12 to 18-month horizon.
Potential outlook or rating change factors
The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
- Significant improvement of the Bank’s capital position and/or increased operational efficiency;
- Significant improvement of asset quality.
A negative rating action may be prompted by:
- Deterioration of the Bank’s liquidity and funding position;
- The shareholder losing interest in supporting the Bank.
Support: SCA +1 notch.
No outstanding issues have been rated.
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Banks and Bank Groups under the National Scale for the Russian Federation, the Methodology for Analyzing Rated Entities Associated with the State or a Group, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of Joint Stock Company Commercial Bank «Lanta-Bank» was published by ACRA for the first time on May 19, 2020. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on data provided by Joint Stock Company Commercial Bank «Lanta-Bank», information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS financial statements of Joint Stock Company Commercial Bank «Lanta-Bank» and the financial statements of Joint Stock Company Commercial Bank «Lanta-Bank» drawn up in compliance with Bank of Russia Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited, and Joint Stock Company Commercial Bank «Lanta-Bank» participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to Joint Stock Company Commercial Bank «Lanta-Bank». No conflicts of interest were discovered in the course of credit rating assignment.