OREANDA-NEWS. National Rating Agency has lowered SB Bank’s national scale credit rating to ‘B-’ following its negative outlook on the bank a few days ago. The outlook remains negative.

The Agency notes SB Bank’s weakened liquidity position, reduced regulatory capital adequacy and  continued delays in the processing of customer orders. Available financials as of Jan. 1, 2015 indicate an outflow of customer deposits in the 2nd half of December, considerable reduction of loro account balances held at the Central Bank, growth of nonperforming loans and a turnover related to the bank’s book of “unexecuted orders”. The significant trading portfolio valuation loss, combined with last year’s operating loss pressure the bank’s equity adequacy. This, aggravated by additional credit provisioning needs, represents the risk of capital impairment. We also note that the bank has virtually exhausted its internal sources of liquidity, while its capacity to raise short-term funding to maintain current liquidity needs is constrained.

SB Bank (full name —“Sudostroitelny Bank” Commercial Bank) is a Russian commercial bank, founded in July 1994 (Reg. No. 2999). The bank’s members and beneficiaries have remained the same since 2000 and include five legal entities, each holding a 20% interest. The Bank's ultimate beneficiaries are its top managers. SB Bank has a general license from the Central Bank and licenses from the Federal Financial Markets Service of the Russian Federation. It holds membership in different professional unions and associations and the Deposit Insurance Service. In addition, SB Bank is an authorized bank of the Moscow Government’s Small Business Lending Fund. In October 2013, it was issued a license for precious metal dealings.

The rating is constrained by SB Bank’s concentrated deposit base, dominated by a single depositor (actually the bank’s shareholder), and poor loan workout dynamics over the past few years. We note however that this weakness is partly offset by the bank’s adequate loan loss provisioning.