The ‘B++' rating indicates that CJSC ICB EVROPEISKY is qualified as a sufficiently reliable borrower (the highest sub-grade of the ‘B' grade). Risk of a delay in meeting liabilities is moderate, restructuring risk for a loan / part of a loan is insignificant.
The rating score of CJSC ICB EVROPEISKY are supported by the high growth rate of its KPIs (assets, capital, profit, profitability) by far surpassing the respective overall growth rates in Russia, which indicates the strengthening position of the credit institution in the market.
The Bank’s own funds have been growing over the last three years. In 2010, its equity capital increased by 36.3% year-on-year. In 2011, the equity capital continued to grow. As of October 1, 2011, the Bank’s equity capital increased by 12.5% year-to-date against the average value of 3.3% in Russia’s banking system.
Income and profit of CJSC ICB EVROPEISKY are also rising. In 2010, net interest income increased by RUB 42.4 million (42.9%). For 3 quarters 2011, it totaled RUB 110.4 million increasing by 6.5% year-on-year. Net fee and commission income also increased by RUB 30 million (14.7%) in 2010; for 3 quarters 2011, it further grew by RUB 40.3 million (25.1%) year-on-year. Overall, this is regarded as a positive signal, since the fee and commission income is stable, with low related risks.
One of the essential arguments for the rating score of CJSC ICB EVROPEISKY is its high profitability. Pre-tax profit for 2010 increased considerably to RUB 176 million from RUB 104 million for 2009 (by 69%). The profit increase was driven by the growing income from loans, foreign exchange operations and other operations. For 9 months 2011, pre-tax profit increased by 38.8% year-on-year to RUB 162 million from RUB 116.7 million. In 2010, the Bank's net profit reached RUB 138.9 million increasing by 93% year-on-year (the highest result over the period under review, 2006-2011). For 9 months 2011, the Bank’s net profit was RUB 126.7 million increasing by 41.1% year-on-year.
CJSC ICB EVROPEISKY has achieved high profitability. Return on equity over the period under review is far above the average value in Russia’s banking system. In 2010, ROE of the Bank grew by 6.6 percentage points year-on-year reaching 24.6% against 12.5% in Russia’s banking system. Return on assets of the Bank is also above the average level in Russia’s banking system. In 2010, ROA reached 2.7% exceeding both the previous year’s result (1.8%) and the average percentage in Russia’s banking system (1.9%).
The Bank’s assets have been growing over the period under review (2007-2011). In 2010, assets increased by 34.1% against 14.9% in Russia’s banking system. As of October 1, 2011, the Bank’s assets increased by 28% year-to-date against 13.7% on average in Russia’s banking system.
Loan assets of CJSC ICB EVROPEISKY are of fairly high quality. As of October 1, 2011, the share of non-performing and problem loans in the loan portfolio was 5.3%, below the average level in Russia’s banking system (about 8%). This proves that the Bank’s credit policy is well-balanced and the credit risk is low. The share of doubtful loans is 8.8% (against 11% on average in Russia’s banking system). Class 1 loans and class 2 loans together account for almost 86% of the loan receivables, which is slightly above the average value in Russia’s banking system (80-81%).
Arrears on the loans granted by CJSC ICB EVROPEISKY and other funds placed by it as of October 1, 2011 was 0.9% of the loan receivables, which is below the average loan arrearage in Russia’s banking system (4.5%).
The high liquidity of CJSC ICB EVROPEISKY also supports the rating score. Quick liquidity ratio of the Bank as of October 1, 2011 was 73.8%, the minimum value required being 15%. Current liquidity ratio equaled 105.8% against the minimum acceptable percentage of 50%. As a whole, the principal liquidity indicators (N2, N3) exceeded the average levels in the banking system of the Russian Federation in 2011. Long-term liquidity was 77.3%, below the maximum limit of 120%.
The high credit risk concentration reduces the Bank’s rating score. The maximum amount of large credit risks (N7) is above average. As of September 1, 2011, N7 was 364.5% (the average N7 value in Russia’s banking system as of the same date being 212.0%). It will be noted that the N7 indicator decreased in the second half year 2010 (which is favorable for the rating score) and did not exceed 400% in 2011. Total magnitude of insider-specific risk (N10.1) has been above the average level in Russia's banking system since 2009 yet does not exceed the higher legal threshold of 3%. As of September 1, 2011, N10.1 was 2% against 0.7% on average in Russia’s banking system.
The share of short-term components in the Bank’s liabilities is high. On-call and overnight liabilities account for just over 50% of the total liabilities - which somewhat increases liquidity loss risks. However, liabilities maturing in over 90 days account for almost 40% of all the Bank’s obligations.
CJSC ICB EVROPEISKY which has been active in the market of banking services since 1991 is among 500 largest banks of Russia. As of October 1, 2011, the Bank's assets totaled RUB 9.7 billion, equity capital was estimated at RUB 934 million CJSC ICB EVROPEISKY possesses general banking license no. 1616 granted by the Central Bank of the Russian Federation on September 20, 2001. In December 2004, the Banking Supervision Committee of the Central Bank permitted CJSC ICB EVROPEISKY to join the Deposit Insurance System (DIS). The auditor of Bank is Finansoviye i Bukhgalterskiye Konsultanty LLC (FBK LLC, English: Accountants and Business Advisers).
CJSC ICB EVROPEISKY provides the standard range of banking products and services involving Russian rubles and foreign currencies. It focuses on providing comprehensive services to corporate customers (prioritizing offering its services to enterprises engaged in foreign trade activities), lending to small and middle-sized businesses.
This press release is based on the statement of assigning a credit rating to ICB EVROPEISKY.
The rating score, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's reliability and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities to the Bank.
AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993.
AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).
AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Provision 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide business banking services to project and engineering entities implementing investment projects), the MICEX (as a prerequisite for including bonds in the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation base, for listing bonds and for providing access to the MICEX+ trading mode). Pursuant to an order of Russia's Government AK&M Ratings count for approving the capitalization increase procedure for banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.
CJSC Analysis, Consulting and Marketing Rating Agency
ul. Gubkina 3
Press release by: Y.B. Kuznetsova
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.