OREANDA-NEWS. The rating cut (from “AA” to “AA-” on the national scale and “BBB” to “BBB-” on the international scale) reflects a steady downward trend in returns on core operations and unstable financial indicators against a background of weak returns on both client loans and assets as a whole.

The rating is based on a solid and well-developed presence in several segments of the regional market; a solid corporate client base; a strong likelihood of official backing from the Tatarstan authorities thanks to historical ties and the Bank’s system-critical role; and the high probability of federal government support in the form of credit resources.

Constraining factors include political and financial dependence on the regional government and the potential impact of politically-motivated decisions; above-average exposure to large-scale credit risks; risks arising from the securities portfolio; and low interest returns.

AK Bars is a major regional bank and a leader in the Republic of Tatarstan, where it enjoys the political and financial backing of the regional government. Within Tatarstan AK Bars operates as a universal bank with an established branch network. An expanded service network currently covers thirty-one regions of the country, giving the Bank a presence at the national level. Retail operations are growing.

Capital is sufficient and of good quality. External funding is diversified by type and judged solid in the medium term. Asset quality is satisfactory, although revenue-generating potential is modest. Profitability measures are weak, reflecting pressure from a low interest margin and expenditures on reserve formation. Overall risk sensitivity is elevated. Liquidity is sufficient.