OREANDA-NEWS. RusRating has raised the credit ratings of PAO MDM Bank from "BB+" to “BBB-“ on the international scale and from "A" to “AA-“ on the national scale, in both cases with a stable outlook.*

According to the agency, the rating increase reflects a favourable assessment of the Bank’s development prospects as a result of membership in the B&N Bank group and capital support from its future shareholders.

The rating is based on the financial strength of the Bank’s owners (among them international financial organisations), its systemic importance, a positive international reputation, and healthy scope for business development.

Constraining factors include a high percentage of problem loans, modest returns on core operations and non-profile investments.

About the Bank

MDM Bank is a systemically-important private-sector bank formed in August 2009 from the merger of MDM-Bank into URSA Bank and controlled by Sergei Popov, the owner of the pre-merger MDM-Bank; several Russian and foreign private and institutional investors hold minority stakes, among them the EBRD and IFC. MDM is an established national player with a strong presence in corporate, retail and investment banking and offers the full range of high-quality financial services. It also benefits from a positive international image, as well as its owners’ financial resources and political ties at the federal level. Relative to competitors its market presence gradually weakened following the 2008 crisis. In June 2015 a controlling stake was sold to the principal beneficiary owners of B&N Bank, whose resources and managerial skills will contribute to stable operations and further development against a background of macro-economic stress.

Capital is sufficient and of satisfactory quality but a substantial portion is immobilised. External liabilities are trending downward despite rising retail balances; diversification is acceptable, with an emphasis on client resources and moderate reliance on affiliated funding sources. Asset quality appears less than satisfactory given a high percentage of problem loans, the loan book’s modest asset weighting, and a noticeable share of long-term investments (in subsidiary companies and closed real estate mutual investment funds) whose current return is essentially zero. Financial results in 2015 have been negative. Current liquidity is sufficient but there are liquidity gaps at the long-term end of the balance sheet. Overall risk sensitivity is elevated.

* The ratings are unsolicited.