Fitch Rates Joint Stock Company RN Bank 'BB+'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has assigned Joint Stock Company RN Bank (RNB) Long-Term Issuer Default Ratings (IDRs) of 'BB+' with a Stable Outlook. A full list of rating actions is available at the end of this rating action commentary.
KEY RATING DRIVERS
RNB's IDRs, National Rating and Support Rating reflect the potential support the bank may receive, if needed, from its foreign shareholders. The bank is owned by UniCredit S.p.A. (BBB+/Negative), through its Vienna-based subsidiary UniCredit Bank Austria AG (BBB+/Negative) with a 40% stake; by Renault SA (BBB-/Stable) through its subsidiary RCI Banque with a 30% stake, and by Nissan Motor Co., Ltd. (BBB+/Stable) with a 30% stake.
In assessing the probability of support, Fitch views positively (i) the strategic importance of the Russian market for Renault and Nissan and the important role of RNB in supporting the two companies' business; (ii) the track record of support, and in particular the predominance of shareholder funding in RNB's liabilities structure; and (iii) RNB's small size relative to its owners, limiting the cost of potential support.
At the same time, RNB's Long-Term IDRs are notched down from those of the bank's shareholders due to (i) each individual owner being a minority shareholder, which may reduce their propensity to provide support; and (ii) Fitch's view that reputational risks for the owners would probably be containable in case of RNB's default.
Fitch has not assigned a Viability Rating to RNB due to its limited track record and high reliance on shareholder funding.
RNB was established in 2013 and started its lending expansion in 2014. The bank has a moderate balance sheet (RUB52bn at end-2015) and a fairly narrow franchise, given the bank's focus on supporting the sales of the Renault-Nissan Alliance brands in Russia. The loan book (83% of total assets) is represented primarily by car retail loans (76% of total loans) and financing provided to Renault-Nissan Alliance dealers (24%). Non-performing loans (NPLs; 90 days overdue) were a low 0.6% of end-1Q16 loans, while reserve coverage of NPLs was a strong 4.6x.
Capitalisation is sound given solid capital ratios (Fitch Core Capital ratio of 15% at end-2015 and regulatory total CAR of 17% at end-1Q16), well reserved NPLs and conservative development plans. RNB's funding is dominated by shareholder placements (83% of total end-2015 liabilities), although the plan is to somewhat diversify this by increasing local funding through bond issuance.
A weakening of the credit profiles of RNB's shareholders, undermining their ability to support the Russian bank, could lead to a downgrade of RNB's ratings, as could a reduction in the importance of RNB for the development of business of Renault and Nissan in Russia. A marked increase in the share of third-party funding of RNB without recourse to the bank's shareholders could also, in Fitch's view, somewhat erode the owners' propensity to support RNB and could result in a downgrade of its ratings.
An upgrade of RNB's ratings would likely require a strengthening of the parents' credit profiles and an extended track record of support for the bank.
The rating actions are as follows:
Long-Term Foreign and Local Currency IDRs: assigned at 'BB+'; Outlook Stable
Short-Term Foreign Currency IDR: assigned at 'B'
National Long-Term rating: assigned at 'AA+(rus)'; Outlook Stable
Support Rating: assigned at '3'