Moody's Interfax confirms Kedr Bank's B3.ru ratings
February 20, 2015 Moody's Investors Service
Moscow, February 20, 2015 -- Moody's Interfax Rating Agency has today confirmed Kedr Bank's national scale ratings (NSR) at B3.ru. The NSRs carry no specific outlooks.
The confirmation of Kedr Bank's ratings reflects evidence of material intervention by the state corporation Deposit Insurance Agency (DIA), and financial support provided via Kedr Bank's new controlling shareholder B&N Bank in order to stabilise the bank's liquidity profile.
Moody's Interfax observes that although liquidity risks were addressed in a timely manner, B&N Bank is still working out a wider financial resolution plan.
Today's rating action concludes the review initiated on 2 December 2014, when Kedr Bank's ratings were placed on review for downgrade.
Please see ratings tab on the issuer/entity page on moodys.com for information on Global Scale Rating.
Moody's Interfax notes that Kedr Bank's liquidity profile stabilised at the end of 2014 after actions taken by the DIA and subsequently by B&N Bank; this intervention had coincided with turbulence across the Russian banking sector. According to Kedr Bank's local GAAP report as of 1 February 2015, its liquidity-to-assets ratio exceeded 30% compared to the 17%-18% level reported in November 2014. Customer deposits have also stabilised during January 2015, although still remaining volatile.
Moody's Interfax says that Kedr Bank's capital profile and its loss-absorption capacity have materially weakened and require replenishment from the new controlling shareholder, B&N Bank. Under the DIA temporary administration procedures, Kedr Bank drastically increased provisioning of the loan portfolio in November-December 2014, which caused financial losses of RUB1.3 billion in 2014 and materially eroded the bank's equity. Under local GAAP, as of 1 January 2015 the regulatory total capital adequacy ratio (N1.0) and Tier 1 ratio (N1.2) dropped to 4.0% and 3.9%, respectively, which are below the regulatory thresholds of 10.0% and 5.5% (as of 1 November 2014, these ratios were 11.4% and 7.4%, respectively).
Moody's says that Kedr Bank's ratings incorporate a high probability of systemic support, which was provided by DIA at the end of 2014. In addition, the bank currently enjoys regulatory forbearance being under financial resolution regime. Moody's also notes, that the financial resolution plan on Kedr Bank is still being worked out by B&N Bank, and this plan is expected to be submitted to the Central Bank of Russia (CBR) for approval by the end of March 2015.
WHAT COULD MOVE THE RATINGS UP/DOWN
Moody's Interfax acknowledges that Kedr Bank's ratings could be positively affected if B&N Bank injects additional equity in the next months according to resolution plan. On the other hand, Moody's Interfax acknowledges that recapitalisation may not be part of the financial resolution plan, given that Kedr Bank might be merged either with ROST Bank or B&N Bank in 2016. Negative pressure could be exerted on Kedr Bank's ratings if recapitalisation does not materialise and the bank requires additional financial support to stabilise its operating activity in the currently challenging environment.
The principal methodology used in this rating was Global Banks published in July 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Domiciled in Krasnoyarsk, Russia, Kedr Bank reported total assets of
RUB26.1 billion, shareholders' equity of RUB2.4 billion and net loss of
RUB372.2 million as at 30 June 2014 under unaudited IFRS.
Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".ru" for Russia. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in June
2014 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".
ABOUT MOODY'S AND MOODY'S INTERFAX
Moody's Interfax Credit rating Agency (MIRA) specializes in credit risk analysis in Russia. MIRA is a joint-venture between Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and the Interfax Information Services Group. Moody's Investors Service is a subsidiary of Moody's Corporation (NYSE: MCO).
Company — Kedr Commercial Bank
Full nameKEDR Public Joint-Stock Company Commercial Bank