The Bank “Russian standard” may demonstrate losses under IFRS in 2016 due to the growth of expenditure on reserves and slow recovery in margin, reported in Thursday, October 27, rating Agency Standard & Poor’s Global Ratings.
Weak dynamics of the Bank’s business is less significant than its nearest competitor, the stock of capital hinder the recovery of the majority of financial indicators, the Agency said.
If “the Russian standard” will not be able to recover the dynamics of the business, improve margins and reduce costs on the formation of reserves, it will need capital in the next 12 months.
Debt “Russian standard” that the Bank must repay in the coming year, include subordinated debt worth up to $169 million and priority public debt of $38 million, says S&P. the Agency believes the Bank’s capital sufficient to repay this debt. By October liquidity “Russian standard”, according to the S&P was about 23 billion rubles, or 6% of its total assets.
However, after the loss of 33 billion rubles, which the Bank has accumulated over the past 2.5 years, the stability of its business declined, the Agency said. It happened despite the support of shareholders in 2015, which S&P estimated at 28 billion rubles.
The Agency’s findings did not prevent him confirm the long-term and short-term credit ratings of the Bank at CCC+/C. the Forecast on ratings S&P keeps negative.
The capital adequacy ratios of the Bank are among the highest in the industry, said the representative of “Russian standard”. On October 1, the value of N1.0% to 10.71% at the minimum acceptable level of 8%. “So now there are no serious limitations for further development, but this does not mean that in the near future we will begin to sharply increase its loan portfolio,” he said.
“The business model “Russian standard” began to limp, after they ceased to increase its loan portfolio is actually financed through the issuance of new loans,” — said the chief analyst of PSB Dmitry Monastyrshin. In his opinion, the Bank’s funding remains relatively expensive compared to the major players in the market. Therefore, there is a risk that the Bank will ripen late on the loan portfolio, allows Monastyrshin. “While the Bank has not shown the ability to generate a sustainable profit. And loss will result in reduction of capital, which, in turn, there is the question of capitalization. Maybe if the Bank will not be able to find new capital, it will reduce the credit portfolio” — does not preclude the analyst.
According to the report, the company, as of July 1, 2016, the size of its fixed capital amounted to 38.7 billion rubles. the Adequacy of the basic capital at the same date was 8.6% with a minimum of 6% and basic — 5% with a minimum of 4%, the analyst of Raiffeisenbank Denis Poryvai. “Accordingly, the margin of safety is the amount of loss which can absorb this capital is only 14 billion rubles Based on the current dynamics, there is a risk that the Bank over the next 12 months, in such amount as a loss and get,” he fears. As a result, there arises again the question of raising additional capital. Where to take it, what tools — is unclear.”
Poryvai also refers to the restructuring plan of “Russian standard” until 2021, at which the Bank should conclude in 2017 with a profit of 5.3 billion rubles. “They expect to get it due to two factors: the growth of interest income by almost 12 billion rubles, and the release of funds from reserves for possible losses even by 27.6 billion rubles,” — says the analyst. But, says Poryvai, the model does not assume that in 2017, “Russian standard” may increase the amount of assets weighted by risk (risk weighted assets). Therefore, according to the analyst, such a large increase in interest income is uncertain. “Excluding those factors profit may not happen, there is a risk of losses,” he admits.
Loss of “Russian standard” under IFRS in the first half of 2016 amounted to 2.7 billion rubles, follows from the statements of the Bank. Thus in 2015, “Russian standard” made a profit of 16.5 billion rubles. As earlier wrote , in the profits of the Bank came out with its shareholder Roustam Tariko, which in 2015 is double-capitalized “Russian standard” for a total amount of over RUB 14 bn, However this was not enough, and the Bank’s financial position was fixed due to the restructuring of subordinated Eurobonds what did the “Russian standard” an additional $451 million in 2015 for increase of capitalization, the Bank received from the government Federal loan bonds at 5 billion rubles By the end of 2014, “Russian standard” has shown a net loss of 15.9 billion rubles mainly due to growth of expenses on creation of reserves.