OREANDA-NEWS. RusRating has lowered the credit rating of JSC FundserviceBank (Moscow) from "BB+" to “B+” on the international scale and from "A-" to “BB+” on the national scale, in both cases with a negative outlook. The Bank has been placed on the agency’s watch list.

The rating cut and negative outlook reflect uncertainty about the Bank’s future prospects following the appointment of a temporary administration; the possibility of its license being withdrawn due to an insufficient capital base; and weakening financial indicators.

Inclusion in the watch list means that the rating and rating outlook could change (either favourably or unfavourably) in response to additional information received from the Bank or from public sources.

The rating itself is based on an expected financial rehabilitation programme; the maintenance of solvency under the temporary administration; and the Bank’s importance to a strategic industry.

Constraining factors include an unacceptably low capital base; weakening financial indicators; operational risks associated with the imposition of a temporary administration; and uncertain future prospects.

About the Bank

FundserviceBank is a private-sector Moscow bank that ranks among Russia’s top one hundred by assets. In February 2015 the Central Bank of Russia called on the Deposit Insurance Agency to take it under temporary administration and invited Novikombank to take part in this process and in reviewing its financial condition. The previous management team is no longer in control. Fundservice is a member of the STK Soyuz group, an established player in advanced technology controlled by Bank President Alexander Volovnik (85% stake). The Bank’s business centres on the provision of integrated services to firms in high-tech and research-intensive sectors, particularly the aerospace and defence industries. A strong client base in various regions of the country draws mainly on these strategic industries and in part reflects partnerships with the responsible government bodies. For the most part retail development has focused on payroll projects and funding drawn from the employees of corporate clients. Securities market activity is minimal.

Capital adequacy requirements are not satisfied. External funding draws to a large extent on budgetary resources and state-sector bodies in strategic industries; risks to stability are high. Asset quality, which depends mainly on client loans, in judged less than satisfactory based on assessments by the temporary administration; measures of realised credit risks are modest. Losses caused by expenditures on reserve formation in February 2015 exceeded the capital base, but returns on core operations remain strong. Overall risk sensitivity is high. Risks to liquidity are likewise high.