"Expert RA" confirmed JSC "MTBank" credit rating at byBBB level on national scale

Expert RA rating agency confirmed the credit rating of JSC "MTBank" at the byBBB level, rating outlook - stable.

Considering the adjustment for country risk when transferring the credit rating from the national rating scale of the Republic of Belarus to the national rating scale of the Russian Federation, the credit rating of JSC "MTBank" was confirmed at the level of ruBB-, rating outlook - stable.

The bank's rating is conditioned by acceptable market positions, acceptable assessment of capital adequacy with high business profitability, adequate quality of assets, comfortable liquidity position, as well as acceptable assessment of corporate governance and strategic planning system.

JSC "MTBank" is a universal bank, a member of the II level systemically important banks group. The bank's presence network is represented by the head office in Minsk and 90 subdivisions located in all regions of the Republic of Belarus.

Rating rationale

Acceptable market positions are due to the average scale of the bank's business in the banking system of the Republic of Belarus (as of 01.07.2023 the bank's assets amounted to about 2.3% of total assets of the national banking sector). In the period from 01.07.2022 to 01.07.2023, the bank continued to scale up its business (IFRS assets increased by 20%, loan portfolio - by 34%), while growth was not concentrated on individual segments, which allowed the bank to maintain the high diversification of its business characteristic (Herfindahl-Hirschman index for assets amounted to 0.23). At the same time, the bank has strong market positions in the consumer lending segment. According to the agency's estimates, the bank is characterized by maintaining a low level of loans to related borrowers.

Acceptable assessment of capital adequacy with high business profitability. During 2023, against the background of loan portfolio growth, the bank's capital adequacy calculated in accordance with national standards showed a decrease (as of 01.01.2024, regulatory capital adequacy was 15.1% against 17.2% as of 01.01.2023, Tier I capital adequacy - 8.8% and 10.5%, respectively). Loss absorption buffer as of 01.07.2023 allowed to withstand without violation of norms impairment of up to 3,5% of assets and off-balance liabilities at risk, which is assessed as low level. At the same time, the agency expects a significant increase in Tier I capital adequacy in January 2024 as a result of the audit of last year's profit.

The bank is also characterized by low concentration of large credit risks, which ensures additional support to the capital position. The bank still demonstrates high indicators of business profitability: ROE on profit after tax for 2022-1H2023 in annualized terms amounted to about 25% according to IFRS. The Agency positively assesses the decrease in the ratio of expenses related to support of activity to net income of the bank, which, first of all, was promoted by the growth of net interest income (for the period from 01.07.2022 to 01.07.2023 the CIR indicator according to IFRS reporting data made about 45% against 57% a year earlier).

Adequate asset quality. According to the IFRS reporting data, as of 01.07.2023, about 70% of the bank's asset structure was occupied by the client loan portfolio, more than half of which was the debt of legal entities. During 1H2023, the share of stage 3 in the corporate loan portfolio decreased from 14.6% to 10%, while the share of the portfolio with overdue debt over 90 days was about 3.8%. At the same time, the portfolio with overdue payments is mostly represented by claims to one large client, while after 01.07.2023 the borrower almost completely repaid the arisen overdue debt. The portfolio of loans to legal entities is characterized by an acceptable level of security (as of 01.07.2023 the share of secured loans amounted to about 95%) and adequate sectoral diversification (the share of debt of borrowers from the 3 largest industries amounted to about 53%). Retail loan portfolio is still represented mainly by consumer loans, its quality has not undergone significant changes over 12 months (as of 01.07.2023 the share of stage 3 was less than 2.5% of the portfolio). As of 01.07.2023, the securities portfolio consists mainly of government bonds, funds in credit institutions are mostly represented by balances on correspondent accounts with resident as well as non-resident banks, mainly with high creditworthiness ratings.

Good liquidity position. Current reserve of balance sheet liquidity of the bank is estimated as adequate: for 1H 2023 the average value of liquidity coverage ratio (LCR) made 124%, net stable funding ratio (NSFR) - 132%. In the period from 01.07.2022 to 01.07.2023 the bank increased the volume of attracted funds of clients by about 20%, thus the resource base remains sufficiently diversified by sources (funds of legal entities as a key source of funding accounted for slightly more than 40% of liabilities). Diversification of the resource base by clients is assessed as moderate (as of 01.07.2023 the funds of 10 largest creditors accounted for about 22% of liabilities, the share of the largest group of creditors - about 6%). The share of issued securities remains low (less than 5% of liabilities).

Acceptable assessment of the organization of the corporate governance and strategic planning system. According to the agency, the level of corporate governance corresponds with the scale of the bank's activities and the strategic objectives set for it. Business reputation and professional experience of the bank's top management are considered adequate. The rating is still constrained by the presence in the ownership structure of non-resident companies registered in regions with favorable taxation regime. The bank works within the development strategy for the period of 2022-2024, within the framework of which it will continue to develop as a universal credit organization, maintaining moderate growth rates of business volumes in the main directions of activity. The Agency notes strategic uncertainty characteristic for the whole banking sector of the Republic of Belarus, connected with constantly changing macroeconomic conditions, which may affect the fulfilment of key parameters of the bank's development strategy.

External influence assessment

There are no external influence factors.

Rating outlook

The rating has a stable outlook, which implies a high probability of maintaining the credit rating at the current level for 12 months.

The credit ratings of JSC "MTBank" were first published on 05.10.2021. The previous rating press releases on this rating subject were published on 14.03.2023. The credit ratings are assigned according to the national scale of the Republic of Belarus and according to the Russian national scale and are long-term. Revision of the credit ratings and their outlooks is expected no later than one year from the date of the last rating action.

The methodology of assigning creditworthiness ratings to banks (Republic of Belarus) (effective 25.04.2023) and the methodology of transferring credit ratings to the national rating scale of the Russian Federation (effective 28.12.2023) were applied in assigning credit ratings.

The assigned ratings and their forecasts reflect all essential information about the rating object, available at Expert RA JSC, the reliability and quality of which, in the opinion of Expert RA JSC, are appropriate. The key sources of information used in the rating analysis were the data of the Bank of Russia, the National Bank of the Republic of Belarus, the National Statistical Committee of the Republic of Belarus, JSC MTBank, as well as the data of JSC Expert RA. The information used by Expert RA JSC within the rating analysis was sufficient for application of methodologies.