ACRA affirmed credit rating of Russian Agricultural Bank at AA(RU) with Stable outlook and upgraded its standalone creditworthiness assessment
31 March 2021
The Analytical Credit Rating Agency (ACRA, the Agency) has affirmed the credit rating of Russian Agricultural Bank (RusAg, the Bank), outlook Stable, and its senior unsecured debt ratings that are equivalent to that of the Bank.
The credit ratings of RusAg and its senior bonds were affirmed due to the Bank’s high systemic importance for the Russian economy and the national banking system, government support, as well as the leading position in lending to the domestic agribusiness.
ACRA report states that RusAg is one of the largest Russian banks (ranked fifth in assets and capital) and the third largest state-owned bank in terms of assets.
The Agency notes the Bank’s strong franchise, which is characterized by one of the most developed regional networks in Russia and is based on the loyalty of the customer base throughout the country. RusAg’s funding structure is assessed by ACRA as balanced and is conditioned by a sufficient volume of liquid and highly liquid assets to cover potential outflows, and high short-term liquidity indicators.
At the same time, ACRA upgraded RusAg’s standalone creditworthiness assessment (SCA) to bbb- based on the better risk profile assessment. The Agency notes an increase in profitability of the Bank’s operations along with an improvement in the quality of its loan portfolio. ACRA indicates that the current level of RusAg’s problem and potentially problem loans is approaching to the indicators of comparable financial institutions and expects a further decrease in their volume.
“ACRA’s assessment confirms that the Bank is implementing the right strategy: we are increasing lending to agribusiness and related industries, developing mortgage lending, while improving the efficiency of operations and the quality of assets. It is important that RusAg works in the interests of the whole country solving the most important tasks for the development of the national economy and strengthening the well-being of people. First of all, we develop the most important industry for every person – food production. We plan to continue supporting both business projects and millions of retail customers across the country”, - Boris Listov, Chairman of the Board of Russian Agricultural Bank, noted.
According to the ACRA methodology, the standalone creditworthiness assessment of a bank reflects its ability to meet financial obligations in full within the contractual period and without external support, as well as its systemic importance and extraordinary external events that may affect its creditworthiness.
The increase in SCA led to an upgrade of the rating of RusAg’s subordinated perpetual bonds to B(RU).
In 2020 the Russian Agricultural Bank Group earned a record RUB 13 billion in net profit (IFRS), which is 3.2 times over the results of 2019, driven by ongoing improvements in asset quality, operating income growth and efficient cost management.