S&P assigned Raiffeisenbank the highest stand-alone credit rating in Russian banking sector

S&P Global Ratings assigned its 'BBB-/A-3' long- and short-term issuer credit ratings to Raiffeisenbank. The outlook is stable. The stand-alone credit profile (SACP) rated at 'bbb-' which is the highest among Russian banks rated by S&P.

«We are thankful for such a high rating of S&P. The rating agency not only noted our strong business profile and our efforts in building successful banking business over the years but also valued our efficiency in volatile macroeconomic environment. A rating from one of the world’s largest agencies continues to strengthen the level of customer confidence and confirms our high status in the Russian banking system once again. We are proud to have one the best ratings compositions on the market», — said Sergei Monin, CEO of Raiffeisenbank.

The S&P’s ratings reflects view that Raiffeisenbank is more resilient than domestic peers to the volatile market environment in Russia. Although not immune to systemwide risk in Russia, Raiffeisenbank has one of strongest financial profiles in Russia, in our view. We reflect this in our assessment of its stand-alone credit profile (SACP) at 'bbb-', which is three notches higher than the average level in the system, as stated the agency.

Strong financial results

According to S&P, strong operating performance over recent years has allowed Raiffeisenbank to create substantial buffers to absorb the expected increase in credit losses related to the deteriorated macroeconomic conditions expected for the Russian banking sector in 2020–2021.

Raiffeisenbank has been successfully implementing a strategy of balanced growth and generating a profit over the years, agency mentions: as a result, the bank’s average return on equity for 2015–2019 remained the highest among large Russian universal banks, at about 24%. Thanks to the balanced business model and experienced management, we expect the bank will perform strongly over the next two years, despite the current stress in the sector because of the coronavirus pandemic and a decline in oil prices that will affect creditworthiness of corporate and retail customers in 2020–2021.

S&P forecasts Raiffeisenbank’s risk-adjusted capital (RAC) ratio before adjustments will remain above 7% over the next 18–24 months. Agency considers Raiffeisenbank will continue to show positive financial results and that internal capital generation capacity will be sufficient to cover the growth in risk-weighted assets, despite challenging operating conditions and economic recession in Russia. For the first half of 2020, Raiffeisenbank reported a strong net profit of Russian ruble (RUB) 18.8 billion which is comparable with the results for the same period a year earlier, amid deterioration of the macroeconomic environment. Raiffeisenbank’s profitability indicators are among the highest in the Russian banking sector, as agency underlines.

Digital transformation and role in RBI

S&P highlightes the significant efforts of Raiffeisenbank in digital transformation. Bank has almost doubled its investments in digital services and technological development in 2019. It’s an important factor that will support the bank’s leading market positions in the next few years while maintaining one of the lowest cost-to-income ratios in Russia (on average, about 38% in 2015–2019). The bank’s customers are actively turning to digital channels, resulting in almost 60% of loans and 70% of deposits are being arranged online.

Successful operations of Raiffeisenbank in Russia are an important element for the Raiffeisen Bank International group’s growth strategy in EMEA developing markets. According to S&P’s criteria, agency typically rates highly strategically important subsidiaries one notch below the rating on the parent. In the case of Raiffeisen, however, the ratings are capped at the 'BBB-' long-term foreign currency sovereign credit rating on Russia.