OREANDA-NEWS. According to the agency the change in outlook reflects growing credit risks and a decline in loan book quality against the background of a shrinking market for retail loans.

The rating itself is based on renewed growth; stronger and more consistent earnings performance; established market positions; possible access to federal government backing in the form of credit resources; and long-term partnerships with international financial institutions.

Constraining factors include narrow lines of business; high credit risks; and limited refinancing options.

Russian Standard is a major private-sector bank controlled by businessman Rustam Tariko and the principal asset of the Russian Standard group. Its business is focused on retail loans and up until 2007 saw rapid growth that made the Bank a market leader in this area. In the second half of that year access to refinancing on international markets began to dry up in response to crisis conditions and Russian Standard started cutting back its business, turning to retail deposits as an alternative source of funds. Risks arising from a shrinking loan book were offset by investments in securities and claims acquired from third parties. Retail credit activity is once again growing.

Capital is sufficient. External funding draws mainly on retail deposits, although borrowing in the capital markets has resumed. Asset quality is less than satisfactory. Risk exposure is high but the associated risk sensitivity is judged moderate thanks to a strong interest margin. Returns on core operations are high but trending downward, while pressure from credit risks is growing. Current liquidity is sufficient. Overall risk sensitivity is elevated.