London, 30 October 2015– Moodys Investors Service has today downgraded the long-lasting
local and foreign-currency deposit and senior unsecured debt ratings
of Tatfondbank to B3 from B2. It has also downgraded the banks
baseline credit evaluation (BCA) and adjusted BCA to caa1 from b3.
This is driven by accelerated pressure on the banks financial basics,.
in particular volatile liquidity, and weak profitability.
Last B3 scores include a one-notch uplift from the banks.
BCA based upon our evaluation of moderate likelihood of support from the.
federal government of Tatarstan (Ba2, Negative). The rating firm.
has likewise verified the banks short-term deposit ratings at.
Not-Prime. The outlook on the long-term ratings is.
The long-term Counterparty Risk Assessment (CR Assessment) has.
been downgraded to B2(cr) from B1(cr) and the short-term NP(cr).
CR Evaluation has actually been verified.
The downgrade of Tatfondbanks ratings shows heightened pressure.
on the banks monetary profile from the deteriorated operating.
environment, especially on its funding and liquidity position,.
Tatfondbanks liquidity has the tendency to be unpredictable, subject to market.
debt repayments and/or clients deposit outflows. As of October.
1, 2015, liquid possessions excluding promised securities decreased.
to 10.9 % on an unconsolidated basis under regional GAAP (15.9 %.
since July 1, 2015), which we think about to be restricted in the.
context of the banks vulnerable funding base. The bank has.
product deposit concentrations, with the leading 20 biggest customers.
accounting for 35 % of the banks deposit base, which.
makes liquidity unstable, when it come to large client outflows.
Market funds totaled up to 32.7 % of the banks assets.
since H1 2015, primarily comprised of local bond concerns (RUB19 billion),.
CBR funding (RUB17.3 billion), positionings of other banks.
(RUB13.8 billion) and eurobond problems of $70 million (RUB.
Tatfondbanks possession quality is under pressure from challenging market.
conditions. As a procedure of issue loans, we think about the.
share of non-performing loans (NPLs– loans past due more.
than 90 days) and reorganized loans, which otherwise would be overdue.
or impaired (annual information under IFRS). These issue loans increased.
to 14.3 % as of H1 2015 from 10.6 % at year-end.
2014. At the very same time, NPLs 90+ represented 4.8 %.
as of H1 2015, up from 4.3 % as of year-end.
2014. Loan loss reserves (LLRs) of 12.9 % of gross.
loans offer 90 % coverage over issue loans. We keep in mind the.
high share of unsecured loans in the business loans book at around 50 %.
and material exposure to financial service business (generally securities.
trading) at 19 % as of H1 2015, which renders the bank susceptible.
to financial market performance. Tatfondbanks cost of danger.
for the overall loan book amounted to annualized 3.4 % in H1.
2015 and given unfavorable trend in asset quality we anticipate additional provisioning.
to pressure profitability.
We anticipate the bank to be loss-making at the end of 2015,.
constricted by squeezed net interest margins (NIM) and heightened credit.
costs. The rise of the Reserve bank of Russias key interest.
rate to 17.0 % in December 2014 resulted in a two-fold.
growth of Tatfondbanks interest expenses. Following the.
growing of costly deposits by end of H1 2015, the NIM began.
to recover slightly– being positive but at just 0.2 %.
since H1 2015 under consolidated IFRS. However, the bank.
stays loss-making on a pre-provision basis.
While Tatfondbanks loss absorption capacity is weak offered bad.
internal capital generation, its capitalisation has actually been supported.
by investors. In July-August 2015, Tatfondbank.
received subordinated loans of RUB2.4 billion from the entities.
associated with the Republic of Tatarstan. Of these, RUB2.1.
billion will be moved into Tier1 capital by the end of October 2015,.
along with a brand-new capital injection with a total Tier 1 capital increase.
of RUB4 billion. In addition, Tatfondbank was included in.
a list of 10 Russian local banks qualified for participation in a state.
program for banks recapitalisation through federal loan bonds (OFZ),.
under which it will receive funds of around RUB1.8 billion to be.
included in Tier 2 capital under regional policy by the end of 2015.
We thinkOur team believe that there is a moderate possibility of assistance for Tatfondbank.
from the federal government of Tatarstan and its related companies. This.
outcomeslead to a one-notch uplift from the banks BCA of caa1.
Our viewpoint is based on Tatfondbanks noteworthy market position in the abode.
region of Tatarstan (26 % in retail deposits, 17 % in.
assets), around 30 % indirect ownership by the local federal government.
through affiliated companies after the capital injection, and the.
banks track record of support, including its current capital.
WHAT COULD MODIFICATION THE RATINGS UP/DOWN.
A scores upgrade is not likely within the next 12 months since of the.
banks current negative outlook. We would consider changing the.
outlook back to stable with the potential for score upside if there are.
enhancements in the operating environment and/or strengthening in Tatfondbanks.
financial profile– including maintenance of steady financing and.
adequate liquidity, enhancement in possession quality and core success,.
as well as the upkeep of excellent capitalisation.
Moodys could downgrade the banks ratings if there are signs of further.
weakening of its standalone credit profile, including considerable.
scarcity of liquidity or fund outflows, material impairment of its.
loan book, extended negative profitability and, as a result,.
product disintegration of its capital buffer. Indications of weaker ties between.
the bank and the regional federal government would also be unfavorable for the supported.
The primary method utilized in these ratings was Banks published in.
March 2015. Kindly see the Credit Policy page on www.moodys.com.
for a copy of this methodology.
For scores provided on a program, series or category/class of debt,.
this statement supplies particular governing disclosures in relation.
to each rating of a subsequently provided bond or note of the same series.
or category/class of financial obligation or pursuant to a program for which the ratings.
are derived solely from existing scores in accordance with Moodys.
score practices. For ratings issued on a support service provider,.
this statement offers certain regulatory disclosures in relation.
to the rating action on the support supplier and in relation to each certain.
score action for securities that derive their credit ratings from the.
assistance suppliers credit score. For provisionary scores,.
this statement supplies specific governing disclosures in relation.
to the provisional rating designated, and in relation to a definitive.
rating that might be appointed subsequent to the final issuance of the financial obligation,.
in each case where the transaction structure and terms have not changed.
prior to the task of the conclusive score in a way that would.
have impacted the score. For further details please see the.
scores tab on the issuer/entity page for the particular issuer on www.moodys.com.
For any affected securities or ranked entities getting direct credit.
support from the main entity(ies) of this score action, and.
whose ratings might change as an outcome of this score action, the.
associated regulative disclosures will be those of the guarantor entity.
Exceptions to this strategy exist for the following disclosures,.
if appropriate to jurisdiction: Ancillary Services, Disclosure.
to rated entity, Disclosure from ranked entity.
Governing disclosures consisted of in this press release apply to the credit.
score and, if applicable, the relevant rating outlook or score.
Kindly see www.moodys.com for any updates on modifications to.
the lead score analyst and to the Moodys legal entity that has actually issued.
Please see the scores tab on the issuer/entity page on www.moodys.com.
for additional regulatory disclosures for each credit rating.
Asst Vice President – Analyst
Financial Institutions Group
Moodys Investors Service Limited, Russian Branch
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JOURNALISTS: 44Â 20Â 7772Â 5456 CUSTOMERS: 44Â 20Â 7772Â 5454 Yves Lemay MD-Banking Sovereign Financial Institutions
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44Â 20Â 7772Â 5456 CUSTOMERS:
44Â 20Â 7772Â 5454 Moodys downgrades Tatfondbanks
long-term deposit and financial obligation scores to B3
and standard credit evaluation to caa1