Moody's rating action is primarily based on Russlavbank's audited financial statements for 2012 prepared under IFRS, as well as the bank's unaudited financial statements for 2013 prepared in accordance with local GAAP.
Moody's says that Russlavbank's ratings reflect the bank's high credit risk appetite, as demonstrated by rapid asset growth and its focus on unsecured consumer lending, as well as the untested asset quality of the bank's rapidly augmented loan portfolio. At the same time, ratings are underpinned by Russlavbank's good position in the niche individual remittances market, recently strengthened capital base and improved profitability metrics.
The rating agency notes that -- effective from late 2012 -- Russlavbank embarked on a new strategy incorporating accelerated development of its retail business. In the period
Rapid growth of consumer lending led to a major shift in Russlavbank's credit profile whereas the share of retail loans (the bulk of which comprise high-risk, albeit also high-yielding, unsecured consumer loans) grew to 81% of the bank's total loan book by year-end 2013 from 67% at
Given the rapid growth of the bank's retail loan portfolio, the rating agency expects that more problem loans are likely to crystallise as the portfolio continues to season.
To confront the pressures placed on Russlavbank's asset quality and ultimately its capital base, in early 2014 the bank's main shareholder injected new capital worth
However, Moody's continues to view the bank's capital levels as modest given the rapid pace of loan growth and the potential level of credit losses that may materialise in the future and thus erode both profitability and capital. Therefore, more capital injections from shareholders will likely be required going forward.
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