On 21 July 2021, S&P Global Ratings upgraded its Issuer Credit Rating on Credit Bank of Moscow to ‘BB’, outlook stable. MKB’s stand-alone credit profile (SACP) was also upgraded by one notch to ‘bb-‘, with the systemic importance support remaining at ‘+1‘. The long-term rating on the bank's holding company Rossium was at the same time raised to 'B'.
The positive rating action reflects a higher evaluation of assets quality. The rating agency commended the Bank's performance during the 2020 economic slowdown. The bank successfully tackled the new challenges and adapted to the new operating environment, as can be seen in its high operational efficiency, profitability, and assets quality. Analysts specifically noted MKB's conservative approach to taking risks.
The analysts commented that MKB’s business model has proven resilient to, and efficient in, the turbulent market environment, as evidenced by its stable asset quality metrics. The bank's problem loans, defined by IFRS 9 as stage 3 loans and POCI, stabilised at 5%, this proportion is among the lowest in the system. In 2020 the Bank charged 1.8% credit costs, which mirrors the sector-average metric, and for 1Q2021 – 0.4% (annualised). The analysts anticipate that stage 3 loans and POCI will likely remain at the current levels and expect the Bank will maintain its focus on high-quality borrowers over the next two years.
In the first quarter of 2021, the bank's net income stood at RUB 8.3 bln compared to RUB 5.1 bln for the same period of 2020. The bank demonstrated good earnings capacity during the turbulent operating environment, posting net income of RUB 30 bln (versus RUB 12 bln for 2019), with one of the best efficiency rates in the sector (cost-to-income ratio of 28% in 2020, and average annual return on equity of about 15% over 2017-2020).
In May 2021, MKB attracted RUB 23 bln of new tier 1 capital via SPO. The bank has sufficient capital buffers for organic business growth and absorption of moderate pressure on asset quality.
Large deposits have been relatively stable with no unexpected withdrawals made. The bank's accumulated liquidity buffers provide additional cushion.
"The rating upgrade attests to MKB's good performance, business model resilience, and risk management quality under the economic pressures of 2020. The Bank earned 30 bln roubles of net income, bypassing the 2019 figure by more than 2.5 times and confirming its market leadership in terms of assets quality and CTI, while retaining comfortable funding and liquidity positions. Furthermore, in May 2020 the Bank strengthened its capital adequacy positions by making an SPO. The consistent improvement of all performance indicators of the Bank led to the rating upgrade. Its credit rating is now 2 notches below the sovereign rating, which is an outstanding achievement for our bank," commented Vladimir Chubar, Chairman of the Management Board.