The credit rating of Center-invest Bank (hereinafter, Center-invest, or the Bank) is based on an adequate business profile, strong capital adequacy, and adequate assessments of risk profile and liquidity and funding.
Center-invest is an organically expanding regional bank that is among the 100 largest banks in Russia. It operates mainly in the Southern Federal District. Key business areas include providing consumer lending, mainly mortgage loans, and lending to SMEs, mostly agribusinesses. Center-invest has been active in promoting ESG principles in its key region of presence, and was among the first banks in Russia to start developing ESG banking.
KEY ASSESSMENT FACTORS
The adequate business profile (bbb) is determined by Center-invest’s stable position in its key region of presence, both in lending and in attracting client funds. Center-invest’s strategy appears well balanced and takes into account current trends in the Russian banking system; the quality of the Bank’s corporate governance is assessed as high. The Bank’s business profile assessment is supported by the consistently high diversification of its operating income.
The Bank’s strong capital position stems from its loss absorption cushion, which is kept within the accepted balance and off-balance sheet risks as per both national regulatory standards and Basel standards, which allows Center-invest to sustain an increase in the cost of credit risk of up to 500 bps without the need for any external financial support. At the same time, the Bank’s ability to generate capital is assessed as adequate (the average capital generation ratio, ACGR, exceeded 100 bps for the past five years). The Bank’s operating efficiency indicators are at the same level as last year and correspond to the market averages.
The adequate risk profile assessment is determined by an adequate risk management system, as well as the acceptable quality of the loan portfolio, which accounts for most of the Bank’s assets. The share of problem and potential problem loans in the loan portfolio has declined over the past 12 months. The portfolio’s concentration on the ten largest groups of borrowers, high-risk industries, and related parties is still insignificant. The share of non-core assets on the Bank’s balance sheet declined substantially after the Bank sold part of the collateral it held.
Due to a strictly conservative approach, a significant portion of Center-invest’s temporarily free liquidity is deposited with the Bank of Russia. The Bank does not deal in securities, and the share of assets and liabilities denominated in foreign currencies is extremely low.
The adequate liquidity and funding position is based on an adequate long-term liquidity shortage indicator and the adjustment applied by ACRA when assessing the short-term liquidity shortage indicator. As of March 31, 2022, Center-invest had a liquidity deficit in the base case and stress scenarios in view of the Bank’s decision to not replace withdrawn deposits with more expensive ones (due to the prevailing market conditions at that time, and expectations of a decrease in demand for loans and a seasonal recovery of liquidity in the summer). At the same time, ACRA notes the Bank’s compliance with regulatory liquidity standards with a significant margin and the current recovery of the short-term liquidity position, given the gradual increase in the level of the short-term liquidity position.
The pronounced dependence of Center-invest’s resource base on funds of individuals is somewhat offset by a low concentration on the ten largest groups of lenders. The Bank does not raise funds from the regulator.
Adhering to the current business model within the 12 to 18-month horizon;
Loan portfolio growth rate not exceeding 5% in 2022;
Tier 1 capital adequacy exceeding 12% within the 12 to 18-month horizon.
potential outlook or rating change factors
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
Material decline in the share of problem loans in the loan portfolio;
Significant decrease in resource base concentration on the largest source and recovery of the liquidity position.
A negative rating action may be prompted by:
Decrease of capital adequacy indicators/ratios prompted by growth in the cost of risk or dividend payments;
Increase in the share of problem loans in the loan portfolio and/or growth of the volume of non-core assets held by the Bank;
Deterioration of the liquidity position.
Standalone creditworthiness assessment (SCA): а.
There are no outstanding issues.
The credit rating has been assigned to Center-invest Bank 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 the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.
The credit rating of Center-invest Bank was published for the first time by ACRA on July 26, 2018. 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 Center-invest Bank, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS consolidated financial statements of Center-invest Bank and the financial statements of Center-invest Bank drawn up in compliance with Bank of Russia Ordinance № 4927-U dated October 8, 2018. The credit rating is solicited, and Center-invest 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 additional services to Center-invest Bank. No conflicts of interest were discovered in the course of credit rating assignment.