OREANDA-NEWS. RusRating has lowered M Bank's credit rating from “BBB-” to “BB-” on the national scale and from “BB-” to “B-” on the international scale, in both cases with a negative outlook.

According to the agency, the rating cut mainly reflects high regulatory risks. This assessment is based on:

high credit risks arising from unsecured financing for investment projects, which increase the risk of inability to meet obligations (of which more than 60% are retail deposits);

minimal loan provisions insufficient to cover the above risks and high loan concentration by individual borrower; and

low capital adequacy in terms of ability to cover current risks and assume new risks.

Other contributing factors include:

growing risks to liquidity in response to slower/negative growth in retail deposits (the Bank's primary source of funds) since July 2014 coupled with the reduced scope for financial support from affiliated companies;

a low return on core operations due to the financing of client loans out of high-cost retail deposits;

ongoing active reputation risks, including negative reports about the unofficial group of banks and non-bank companies of which M Bank is a member.

The rating itself is based on the Bank's current market positions.

Constraining factors include a lack of transparency with respect to the Bank's beneficiary owners, reputation and regulatory risks, and uncertain prospects for shareholder support.