YEREVAN, June 30. /ARKA/. Moody’s Investors Service said in a press release that it has assigned B2 long-term and NP short-term local- and foreign-currency deposit ratings, a b2 baseline credit assessment (BCA) and adjusted BCA, as well as a B1(cr) long-term and NP(cr) short-term Counterparty Risk Assessment (CR Assessment) to Armenia’s Anelik Bank CJSCo. The long-term deposit ratings carry a stable outlook.
According to Moody’s, the B2 long-term deposit ratings assigned to Anelik Bank incorporate its b2 Baseline Credit Assessment and reflect the bank’s: (1) strong loss absorption capacity — evidenced by robust capital buffers and strengthening profitability; (2) adequate asset quality indicators; (3) adequate funding and liquidity profiles. At the same time, Anelik Bank’s ratings are constrained by the bank’s evolving business model and short track record under its new ownership and strategy.
The assigned ratings reflect Anelik Bank’s strong loss absorption supported by the bank’s robust capital buffers and strengthening income generating capacity. Anelik Bank reported solid capital metrics with a Total Capital Adequacy ratio of 32.8% at 31 December 2016. Moody’s expects Anelik Bank’s capital position to remain strong over the next 12-18 months supported by strengthening internal capital generation.
In 2016, Anelik Bank’s total regulatory capital increased by 165% to AMD 35.5 billion from AMD 13.4 billion as at YE2015, exceeding the minimum capital requirements of AMD 30 billion for Armenian banks effective from 2017. The increase was largely boosted by a capital injection of AMD 21.8 billion ($45 million) contributed by the bank’s new shareholder FISTOCO LTD which acquired 59.68% equity stake and became Anelik Bank’s majority shareholder .
For 2016, Anelik Bank posted net profit of AMD 1.1 billion, up from AMD 215 million in 2015 which translated into a moderate Return on Average Assets of 0.6%. Moody’s expects that Anelik Bank’s recurring profitability will substantially improve over the next 12-18 months, supported by increased business volumes and strengthening interest margin due to declining funding cost.
Moody’s expects asset quality to remain adequate, supported by the stabilized operating environment and the bank’s increased focus on secured lending products. As of 31 December 2016, the bank’s problem loans (impaired corporate and retail loans overdue more than 90 days) accounted for 3.4% of gross loans.
Moody’s expects Anelik Bank’s liquidity and funding profiles to remain adequate over the next 12-18 months. Customer accounts, mainly comprising corporate deposits, accounted for 70% of total liabilities. Interbank funding and issued local bonds constitute the remaining portion of the bank’s funding and in Moody’s view carry a low refinancing risk. In addition, Anelik Bank has maintained a sufficient buffer of liquid assets — around 20% of total liabilities, consisted mainly cash and liquid government bonds.
The stable outlook on the bank’s ratings reflects Moody’s expectations that over the next 12-18 months Anelik Bank’s credit profile will not deteriorate and the bank will maintain a robust capital position, healthy profitability and liquidity profiles.
A longer track record of sustainable and robust financial performance driven by recurring income, along with improving macroeconomic conditions could result in a positive rating action. Conversely, negative pressure could be exerted on Anelik Bank’s ratings in the case of a substantial deterioration of the bank’s asset quality or liquidity profile.
Anelik Bank’s CR Assessment is positioned at B1(cr)/NP(cr). Such assessments are opinions of how counterparty obligations are likely to be treated if a bank fails and relates to a bank’s contractual performance obligations (servicing), derivatives (e.g., swaps), letters of credit, guarantees and liquidity facilities. Senior obligations represented by the CR Assessments are more likely to be preserved to limit contagion, minimize losses and avoid disruption of critical functions.
Anelik Bank established in 1990, is now owned by FISTOCO LTD ( 59.7%) and CreditBank S.A.L. –0–
