MDM Bank Comment on Moodys Outlook Change
OREANDA-NEWS. June 15, 2012. Moody’s lowered to negative from stable the outlook on the D standalone bank financial strength rating (“BFSR”) and Ba2 long-term global local and foreign currency deposit ratings and Ba2 local currency senior unsecured debt rating of MDM Bank in connection with unexpectedly poor financial results and decrease of portfolio of the Bank in Y2011. It is important to note that MDM Bank remains one the highest-rated private Russian banks.
In 2011 MDM Bank adopted a strategy aimed at building a more conservative approach into its portfolio origination standards, and in parallel decided to reflect more conservatively the credit risk on its balance sheet, thus leading to increased provisions which had been reflected in the P&L, and currently stand at the level producing coverage ratio of 106.4%, up from 82.5% at the end of 2010. As a result of this change to a more conservative approach to provisions, additional provisioning charges at the end of
Maintaining high capital adequacy and loss absorption capacity of MDM Bank of 17.8% and 23.5% respectively gives the Bank persistent basis for growth in 2012. Maintenance of high liquidity at around RUB 76.8 bln and improved by retail deposits funding structure as a priority funding source provide new management team headed by Igor Kouzin the tools necessary to stabilize and grow the balance sheet and substantially improve financial results in 2012.
In addition, MDM Bank would like to point out the following about the Bank’s current position:
In 2011 MDM Bank was deliberately focused on high-quality consumers within its strategy targeted for quality which led to portfolio decrease. At the same, time the Bank optimized its funding base by repaying expensive deposits accepted earlier. The new deposits raised in 2011 totaled RUB 141.8 bn.
The Bank continues lending to corporate, small business and retail clients, though has taken measures to reduce credit risks on new loans and any roll-overs on existing loans by obtaining additional collateral and using other credit enhancements, as well as to reduce exposure to higher-risk sectors of the economy.
MDM Bank does not have substantial international borrowings and for this reason is more stable in existing economic circumstances. As one of the largest banks in Russia, MDM Bank has full access to, but is not dependent upon, the wide array of liquidity measures available from the Russian Central Bank and Ministry of Finance. Further, MDM Bank has sufficient network infrastructure with extraordinary opportunities for efficient growth and business development in 2012.
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