The credit rating of PJSC SCB “Metallinvestbank” (hereinafter, Metallinvestbank or the Bank) has been upgraded based on the improvement of the risk profile thanks to stabilization of growth rates of the loan and guarantee portfolios coupled with their continued acceptable quality. The Bank’s credit rating is also determined by the sustainable business profile, strong capital adequacy, and adequate assessment of the funding and liquidity factor.
KEY ASSESSMENT FACTORS
Metallinvestbank’s satisfactory business profile assessment is determined by the medium position currently occupied by the Bank in the Russian banking market (it is among the top 40 Russian banks by capital). The Bank’s head office is located in Moscow, and it has three branches — in Belgorod, Nizhny Novgorod, and Perm. The Bank focuses on lending to corporate and retail clients, factoring, issuing bank guarantees, as well as transactions in securities, foreign currencies, and derivatives.
Historically, Metallinvestbank’s business is relatively well-diversified. The structure of operating income is dominated by corporate lending, however, significant shares are occupied by consumer lending and interbank lending, issuance of guarantees, and investments in securities.
The ownership structure is transparent. The corporate management system corresponds to the business scale and scope of Metallinvestbank. The Bank’s current development strategy runs until the end of 2024 and includes organic growth of key indicators. The Agency assesses the strategy as adequate. The Bank’s strategy for 2025–2029 is currently being approved. ACRA does not expect any major changes to Metallinvestbank’s business development priorities.
Strong loss absorption capacity. Metallinvestbank’s Tier 1 capital adequacy ratio is relatively high under Basel and RAS standards (N1.2 was 11.49% as of October 1, 2024). The Bank’s ability to generate capital based on the growth of retained earnings continues to show good potential. ACRA’s stress test showed that the Bank can absorb an increase in the cost of risk by more than 500 bps without violating regulatory standards. At the same time, amid possible growth in the cost of risk and performance of dividend payments over the next 12 months, the Agency does not rule out some reduction in the Bank’s capital adequacy indicators.
The Bank’s net interest margin (NIM) is comparable to that of its peers, and the three-year average CTI (cost-to-income) ratio is medium.
The risk profile assessment has been improved thanks to the normalization of dynamics for growing the loan and guarantee portfolios coupled with the absence of a significant increase in the share of non-performing debt in the portfolios. The share of Stage 3 loans has slightly increased over the past 12 months, but remains relatively low. ACRA notes the continued high coverage of Stage 3 loans as of 9M 2024. The concentration of the loan portfolio on the 10 largest groups of related borrowers is assessed as moderate (just over 10% of the total loan portfolio). The assessment of the risk management system remains satisfactory.
The volume of Metallinvestbank’s securities portfolio amounts to less than a quarter of Bank’s assets, and it primarily includes Russian government bonds and high-quality corporate bonds. Throughout 2024, market risk has been within the range assessed by the Agency as comfortable.
Adequate funding and liquidity position. Metallinvestbank has an adequate short-term and long-term liquidity profile due to a significant volume of liquid funds on its balance sheet, as well as additional opportunities to raise funds under repo transactions to manage liquidity. The concentration of funding on the largest lenders and individual groups of lenders is assessed as moderate. This year, the Agency notes an outflow of funds from corporates and an inflow of funds from individuals on the back of the current market conditions. If this trend continues, then it is possible that heightened concentration on the largest source of funding will materialize.
KEY ASSUMPTIONS
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Maintaining the current business model within the 12 to 18-month horizon;
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Share of non-performing loans no higher than 10% 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:
- Organic growth of the Bank’s business in the long term coupled with no negative impact of other rating factors.
A negative rating action may be prompted by:
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Decline of the Tier 1 capital adequacy ratio;
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Deterioration of asset quality (including a higher share of non-performing loans or contingent credit liabilities);
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Deterioration of the liquidity position;
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Growing concentration of the resource base on the largest source or the largest lenders;
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Significant deterioration of ability to generate capital.
RATING COMPONENTS
Standalone creditworthiness assessment (SCA): a.
Adjustments: none.
ISSUE RATINGS
Rationale. The issue specified below is subordinated debt of Metallinvestbank in relation to its priority unsecured creditors. According to ACRA’s methodology, the credit rating of this additional capital instrument is three notches below the final rating of Metallinvestbank, which is A(RU).
Subordinated interest-bearing bond of PJSC SCB “Metallinvestbank”, series С-01 (RU000A103JK8), maturity date: February 27, 2032, issue volume: USD 30 mln — ВВВ(RU).
REGULATORY DISCLOSURE
The credit ratings have been assigned to PJSC SCB “Metallinvestbank” and the bond issue of PJSC SCB “Metallinvestbank” (ISIN RU000A103JK8) under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings 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 Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation was also applied to assign the credit rating to the bond issue.
The credit ratings of PJSC SCB “Metallinvestbank” and the bond issue of PJSC SCB “Metallinvestbank” (ISIN RU000A103JK8) were published by ACRA for the first time on February 2, 2018 and October 11, 2021, respectively. The credit rating of PJSC SCB “Metallinvestbank” and its outlook, as well as the credit rating of the bond issue of PJSC SCB “Metallinvestbank”, are expected to be revised within one year following the publication date of this press release.
The credit ratings were assigned based on data provided by PJSC SCB “Metallinvestbank”, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the consolidated IFRS financial statements of PJSC SCB “Metallinvestbank” and the financial statements of PJSC SCB “Metallinvestbank” drawn up in compliance with the requirements of the Bank of Russia. The credit ratings are solicited and PJSC SCB “Metallinvestbank” participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to PJSC SCB “Metallinvestbank”. No conflicts of interest were discovered in the course of credit rating assignment.