OREANDA-NEWS. RusRating has raised Sovcombank’s credit rating from "AA-" to “AA” on the international scale and from "BBB-" to “BBB” on the national scale, in both cases with a stable outlook.

The rating increase reflects healthy profitability measures, participation in a capitalisation support programme run by the Deposit Insurance Agency that involves the transfer of federal government bonds, and a trend towards increasingly diversified assets (a reduced percentage of retail loans).

The rating is based on a wide regional service network, consistently healthy financial results and effective management.

Constraining factors include a moderate market presence in both corporate and retail banking (relative to comparably-sized competitors) and risks associated with the securities portfolio, which accounts for a large portion of the balance sheet.

Sovcombank is a larger private-sector bank and one of Russia’s top ten regional banks by assets. In June 2012 the Netherlands-based holding company TBIF BV, representing the financial arm of the multi-profile investment firm Kardan N.V., disposed of its capital stake; since then the Bank has been wholly-owned by its own top management in partnership with major Russian businessmen. Until recently retail services were its priority line of business, but their asset weighting has now declined in favour of corporate loans and securities.

Capital adequacy is high, thanks in part the transfer of federal government bonds under an official support programme; the Bank has substantial scope for asset growth and capital quality is judged healthy. External funding draws above all on Central Bank resources, with a smaller role played by client balances. Securities (debt issued by reliable borrowers) are the largest component of assets, while the share of retail loans has declined; overall asset quality is judged satisfactory based on the quality of both client loans and the securities portfolio. Earnings performance is healthy thanks to a good net interest margin and stable, growing commission income plus effective management of market and currency risks. Risks to liquidity are judged modest based on the term structure of the balance sheet. Overall risk sensitivity is low.