November 19, 2012 / 4:41 PM / 5 years ago

TEXT - S&P raises CentroCredit Bank

(The following statement was released by the rating agency)

Overview
     -- We believe CentroCredit Bank's capitalization has strengthened, partly 
thanks to earnings retention and low growth.
     -- Accordingly, we now assess the bank's capital as very strong instead 
of strong and have revised our assessment of its stand-alone credit profile 
upward to 'b' from 'b-'.
     -- We are revising our ratings on CentroCredit Bank to 'B/B' from 'B-/C' 
and the national scale rating to 'ruA-' from 'ruBBB-'.
     -- The stable outlook reflects our opinion that CentroCredit Bank's 
business and financial profiles will remain stable over the next 12-24 months. 
We expect the bank to maintain very strong capitalization over the medium 
term, supported by good internal profit generation.  
 
Rating Action
On Nov. 19, 2012, Standard & Poor's Ratings Services raised its long- and 
short-term counterparty credit ratings on Russia-based CentroCredit Bank JSC 
to 'B/B' from 'B-/C' and its national scale rating to 'ruA-' from 'ruBBB-'. 
The outlook is stable. 

Rationale
The upgrade reflects our view that CentroCredit Bank's risk-adjusted capital 
(RAC) ratio, before adjustments for diversification, would remain comfortably 
above 15% over the next 18 months, supported by good internal profit 
generation and low growth. We understand the bank's shareholders do not plan 
any capital injections in the medium term. The amount the bank pays in annual 
dividends equals the amount of dividends it receives from investments. 

CentroCredit Bank's earnings are volatile and dependent on the trading volume 
and performance of major Russian stock indexes. About 60% of its operating 
revenues came from market-sensitive income (mostly related to securities 
holding and trading) during the first nine months of 2012 under Russian 
accounting standards. The volume of securities trading and margins has been 
declining over the past 18 months, reducing the bank's profit generation. 
Nevertheless, in the first nine months of this year, CentroCredit Bank 
achieved Russian ruble RUB2.6 billion (about $87 million) in profit under 
Russian accounting standards.   

Our ratings on CentroCredit Bank reflect its anchor of 'bb', as well as its 
"weak" business position, "very strong" capital and earnings, "weak" risk 
position, "below average" funding, and "moderate" liquidity, as our criteria 
define these terms. The stand-alone credit profile is 'b'.

Outlook
The stable outlook reflects our opinion that CentroCredit Bank's business and 
financial profiles will remain stable over the next 12-24 months. We expect 
the bank to maintain very strong capitalization over the medium term, 
supported by good internal profit generation.  

We could raise the ratings if the bank reduced its reliance on 
market-sensitive and volatile income and demonstrated better business 
diversification. Development of a larger and more diverse depositor base would 
be positive for the ratings. 

We could lower the ratings if faster-than-expected growth or 
lower-than-expected profitability put a strain on the bank's capitalization, 
reducing our forecast RAC ratio before adjustments for diversification to 
lower than 15%.

Ratings Score Snapshot
                                      To                   From
Issuer Credit Rating                  B/Stable/B           B-/Stable/C

SACP                                  b                    b-
  Anchor                              bb                   bb
  Business Position                   Weak (-2)            Weak (-2)
  Capital and Earnings                Very Strong (+2)     Strong (+1)
  Risk Position                       Weak (-2)            Weak (-2)
  Funding and Liquidity               Below Average        Below Average
                                      and Moderate (-1)    and Moderate (-1)

Support                               0                    0
  GRE Support                         0                    0
  Group Support                       0                    0
  Sovereign Support                   0                    0

Additional Factors                    0                    0

Related Criteria And Research
     -- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
     -- Banking Industry Country Risk Assessment Methodology And Assumptions, 
Nov. 9, 2011
     -- Bank Capital Methodology And Assumptions, Dec. 6, 2010
 
Ratings List
Upgraded
                                        To                 From
CentroCredit Bank JSC
 Counterparty Credit Rating             B/Stable/B         B-/Stable/C
 Russia National Scale                  ruA-/--/--         ruBBB-/--/--
 Certificate Of Deposit                 B/B                B-/C 

 (Caryn Trokie, New York Ratings Unit)

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