Standard & Poor’s Ratings Services has raised its long-term counterparty credit and certificate of deposit ratings on Russia’s JSC Impexbank to ‘B-‘ from ‘CCC+’. At the same time, the ‘C’ short-term counterparty credit and certificate of deposit ratings on the bank were affirmed. The outlook is stable.
The ratings upgrade reflects the bank’s good potential to strengthen its commercial franchise in Russia’s growing economy, continuing contraction in exposures to related parties in both assets and liabilities, relatively good diversification of its funding base, and a focused development strategy on the fast-developing retail and small and mid-size enterprise (SME) market in Russia. The ratings remain constrained by the bank’s modest capitalisation, low–albeit improving–core profitability, and high single-party lending concentrations.
“Standard & Poor’s expects that Impex’s financial profile will strengthen as its commercial banking franchise expands,” says Standard & Poor’s credit analyst Irina Penkina. The bank’s focus on retail and SME lending should boost margins and recurrent revenues in the future, and help decrease lending concentration. Operating cost growth is likely to moderate in the medium term, thereby improving overall profitability. The level of capitalization is an important ratings factor for Impex.
Core capitalisation is expected to improve in 2005 due to a subordinated debt conversion and higher net profits.
“A negative rating action might result if the bank’s capitalisation level erodes, lending concentrations are not addressed, or the quality of the loan portfolio and earnings structure deteriorates,” she adds.