Fitch Ratings agency upgrades SDM-Bank ratings
International rating agency Fitch Ratings upgraded SDM-Bank’s national and international currency long term IDR from «B» to «В+», with Stable outlook.
National long term IDR has been upgraded from «BВB(rus)» to «А-(rus)», with Oulook remaining stable.
SDM-Bank debut bond issue rating has also been upgraded to «B+», with debt long term national rating upgrade to «A-(rus)».
The Fitch reported noted the following:
- SDM's upgrade reflects its extended track record of reasonable asset quality, comfortable liquidity and adequate profitability, the stability to date of its franchise and funding and conservative management.
- At end-2012 SDM's reported level of NPL (loans 90 days overdue) was a modest 1.8%, while a further 0.8% was rolled over. Although SDM's loan book concentration remains relatively high (the 20 largest exposures comprised 50% of the end-2012 loan book, or 2.2x Fitch Core Capital (FCC)), Fitch is comfortable with the quality of most of the largest exposures as they are either short-term working capital loans to local medium-sized trade companies or real estate-related project finance loans which are reasonably secured with already operational properties with low loan-to-value ratios (LTVs).
- SDM's customer funding equaled 95% of end-2012 liabilities and is mostly attracted from long-standing clients. Fitch identified some customers (7.5% of end-2012 liabilities) which could be in some way connected to SDM's management and/or the controlling private shareholder. However, risks are mitigated by the bank's healthy liquidity position, with the buffer of liquid assets sufficient to withstand outflow of 38% of deposits. Liquidity is also supported by the relatively fast amortizing loan book (average loan book turnover is 12 months) and the bank's proven ability to de-leverage under stress.
- SDM's capital position is reasonable for the rating category, with a FCC of 16% at end-2012. However, in light of significant loan concentrations, SDM's loss absorption capacity is moderate, with the bank at end-2012 being able to absorb credit losses equal to 5% of the loan book before breaching minimum regulatory capital requirements. Fitch expects internal capital generation and loan growth to be broadly in line for the foreseeable future, meaning that, barring unexpected losses, the capital position is likely to remain largely unchanged.
Fitch Ratings first rated SDM-Bank in December 2008, with IDR level at «B-» and stable outlook.