Rusregionbank received a ruCCC credit rating

The small Rusregionbank, out of the third hundred in terms of assets, received the lowest credit rating among existing market participants – ruCCC. The last time this rating was assigned was in 2019. Judging by the bank’s balance sheet and analysts’ reviews, it belongs to the “dormant” category, since it does not conduct an active lending business and may soon violate its financial obligations. However, Exi-Bank, which received the same rating, is still operating.

On March 12, the Expert RA agency lowered the credit rating of the Russian Regional Bank (Rusregionbank, 298th in terms of assets at the end of 2023, according to Interfax) by one notch, to the ruCCC level, with a negative outlook. According to the rating scale, ruCCC corresponds to a “very low level of creditworthiness/financial reliability/financial stability.” “There is a significant probability that the rated entity will fail to fulfill its financial obligations in the short term,” says Expert RA in its explanation. Rusregionbank did not respond to Kommersant’s request.

At the moment, no other credit organization has such a low rating, not only from Expert RA (assessing 145 banks), but also from other agencies – ACRA, NKR and NRA. This is generally a rare phenomenon in the banking system. For example, the last time Exi-Bank (now 261st place by assets) had a ruCCC rating from Expert RA was from February 2019 to February 2020.

Among the reasons for downgrading the rating of Rusregionbank, agency analysts identified “increased regulatory risks against the backdrop of weak business performance,” “a narrow client base,” “a reduction in lending volumes” (for example, business profitability in 2023 was only 2.2%), as well as “weak assessment of market positions” and sensitive capital position.

Regulatory risks, according to Denis Taradov, partner of the Unicon audit and consulting group, may include, among other things, the possibility of applying administrative measures to the bank, the presence of Central Bank regulations, for example, on additional creation of reserves. Moreover, with such a small size of the bank, according to the expert, additional creation of reserves even for one loan can threaten its financial stability.

According to Denis Taradov, with such a low level of rating, “its presence is no longer important.” “Even on the eve of the revocation of licenses, banks, as a rule, did not have such low ratings,” the expert emphasizes. For example, before the license was revoked from Qiwi Bank (see Kommersant on February 21), its Expert RA rating was at ruBBB–.

Rusregionbank specializes in settlement and cash services, issuing bank guarantees and lending to legal entities. “Against the background of the geopolitical situation, the bank significantly reduced the volume of corporate lending and, from mid-2023, intensified the development of the guarantee business,” notes Expert RA. The rating agency drew attention to “increased regulatory and supervisory risks due to a significant increase in turnover on customer accounts, requiring increased efficiency of the financial monitoring and internal control system.”

Last fall, the bank was included in the US SDN-List (see “Kommersant” dated November 3, 2023). But experts believe that this factor can no longer be called negative from the point of view of financial stability. “Banks have learned to live under sanctions pressure and at the same time continue to earn money and rebuild business models,” says Mr. Taradov.

None of Expert RA’s press releases for downgrading the rating since 2022 cited sanctions pressure as a reason, emphasizes Vladimir Kornev, an analyst at the investment company Digital Broker. At the same time, setting a negative outlook implies a high probability of a rating downgrade in the future, he adds. “Accordingly, it can be assumed that the agency is observing some problems and a possible further deterioration of its situation,” the expert noted.

Meanwhile, at the beginning of the year, 81% of Rusregionbank’s assets were formed by funds placed with the Bank of Russia, analysts said in a statement. According to Form 101, at the beginning of February the bank kept almost 1.6 billion rubles on deposits with the Central Bank. In addition, the bank maintains a high capital adequacy ratio (N1.0) – 39.3% at the beginning of February 2024 (at the beginning of 2023 it was 244%) with a minimum of 8%.

Olga Sherunkova, Maxim Builov