The credit rating of JSC «REALIST BANK» (former «BaikalInvestBank» JSC; hereinafter, REALIST BANK, or the Bank) reflects the Bank's weak business profile, strong capital adequacy, neutral risk profile assessment, and satisfactory liquidity and funding assessment. The Negative credit rating outlook reflects the risks of a decrease in the creditworthiness of the Bank, taking into account the possible negative outcome of the criminal case initiated against its beneficiaries.

Key assessment factors

The weak business profile assessment reflects the Bank's relatively weak franchise. REALIST BANK is a small credit institution whose main lines of business include corporate lending (including gold mining companies), commercial and special-purpose vehicle loans, bank guarantees, trading in gold, and foreign exchange transactions. As of November 1, 2021, the Bank ranked 127th in equity and 144th in assets. The operating income diversification is medium: the Herfindahl-Hirschman Index for 9M 2021 is 0.31. The reputational issues associated with the Bank's ultimate beneficiaries has a negative impact on the business profile assessment.

ACRA assesses the Bank's capital adequacy as strong. As of October 1, 2021, the Bank maintained its capital adequacy ratios at high levels (N1.1 = 14.0%, N1.2 = 14.0%, N1.0 = 15.0%). The current capital adequacy metrics allow the Bank to withstand an increase in the cost of risk by more than 500 bps without violating the regulatory standards. The Bank's profit generation potential is assessed as low (the average capital generation ratio, ACGR, for 2016–2020 is estimated at 58 bps). In November 2021, the Bank paid dividends for a total of RUB 300 mln, which, in the Agency's opinion, does not affect the capital adequacy assessment.

Neutral risk profile assessment. The Bank's loan portfolio contains a moderate share of non-performing and bad loans (as of October 1, 2021, according to ACRA's estimates, the share was 11.0% of the loan portfolio), and the concentration on the ten largest groups of borrowers is acceptable (30%). The quality of management of the main risks is assessed as satisfactory in comparison with peers. The quality of the largest principals for the issued guarantees is assessed as adequate.

Satisfactory funding and liquidity position. As of October 1, 2021, the Bank experienced no shortage of short-term liquidity in either the base case or stress scenarios of ACRA. The long-term liquidity shortage indicator (LTLSI) was 87%, which corresponds to the strong assessment. At the same time, the Agency takes into account the seasonal nature of the business activities of a significant portion of the Bank's clients, gold mining companies. The volume of loans issued in H1 2021 significantly reduces the short-term and long-term liquidity metrics, which has a constraining effect on the overall assessment of the factor.

As of October 1, 2021, the concentration of the resource base was rather increased. The share of the largest lender / ten largest lenders was 12.9% / 41.2% of the Bank's liabilities, respectively. At the same time, the diversification of funding sources is assessed as adequate.

Key assumptions

  • Sticking to the Bank's current strategy and business model in the next 12–18 months;

  • Retaining the Bank's core client base in terms of active and passive transactions;

  • Maintaining the capital adequacy ratio (N1.2) not lower than 12% in the next 12–18 months;

  • Maintaining the loan portfolio's quality and concentration metrics at current levels.

Potential outlook or rating change factors

The Negative outlook assumes that the credit rating may be downgraded within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Significant decline in NPL90+ and/or loan portfolio concentration;

  • Higher resource base diversification and stronger liquidity metrics as per ACRA's methodology.

A negative rating action may be prompted by:

  • Loss of a significant share of core client base in terms of active and passive transactions;

  • Worse capital adequacy and liquidity metrics;

  • Significant increase in non-performing loans or other problem and potentially problem exposures.

Rating components

SCA: b.

Adjustments: none.

Support: none.

Issue ratings

No outstanding issues have been rated.

Regulatory disclosure

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 and the Key Concepts Used by Analytical Credit Rating Agency within the Scope of Its Rating Activities.

The credit rating of JSC «REALIST BANK» was published by ACRA for the first time on November 30, 2017. 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 the data provided by JSC «REALIST BANK», information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using the IFRS statements of JSC «REALIST BANK» and the financial statements of JSC «REALIST BANK» drawn up in compliance with the Bank of Russia's Ordinance No. 4927-U dated October 8, 2018. The credit rating is solicited, and JSC «REALIST 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 ancillary services to JSC «REALIST BANK». No conflicts of interest were identified in the course of credit rating assignment.

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