OREANDA-NEWS. RusRating has lowered the credit rating of PAO “MTS-Bank” (Moscow) from "BBB-" to “BB+” on the international scale and from "AA-" to “A+” on the national scale, in both cases with a stable outlook.

The rating cut reflects a weakening of asset quality in response to external conditions; a rising delinquency ratio; increased overall risk sensitivity; and a decline in the Bank’s creditworthiness as an independent business.

The rating is based on the support of the Bank’s owner; its position as settlement centre for the AFK Sistema group; and a wide, diversified client base drawn from affiliated firms.

Constraining factors include weak earnings and a modest assessment of the quality of corporate governance.

MTS-Bank (formerly known as MBRD) is a larger commercial bank by assets and part of the AFK Sistema group, one of the largest diversified public companies in Russia and the CIS, whose principal beneficiary owner is prominent businessman Vladimir Yevtushenkov. Working with (mostly friendly) large and mid-sized companies in a range of industries is the Bank’s core business. In recent years it has actively developed its retail presence and service network. Securities market activity is moderate.

Capital is sufficient and of good quality. Most external funding previously originated with corporate clients (particularly members of the AFK Sistema group); rising retail balances had improved diversification substantially, but are now trending downwards. Asset quality is judged less than satisfactory, based mainly on analysis of client loans and the securities portfolio. Financial results are negative against a background of pressure from loan provisioning costs, but the Bank's net interest margin is healthy. Risk sensitivity is elevated. Current liquidity is sufficient but risks to liquidity are elevated.