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Moody's upgrades Alfa-Bank's BCA to ba2
25 May 2017Moody's upgrades Alfa-Bank's BCA to ba2 —

On 24 May 2017 Moody’s Investors Service today upgraded Alfa-Bank’s Baseline Credit Assessment (BCA) and adjusted BCA to ba2 from ba3 and affirmed the Ba2 long-term local- and foreign-currency senior unsecured debt and deposit ratings with a stable outlook.

The BCA upgrade to ba2 from ba3 reflects recent improvements in Alfa-Bank’s financial metrics which Moody’s expects to be sustained in the longer term.

In 2016, Alfa-Bank’s non-performing loans (NPLs; loans overdue by more than 90 days) declined to 4.2% from6.9% in 2015 owing to a stabilization in the operating environment, much lower build-up of new problem loans, and successful work-outs of legacy problem assets. Alfa-Bank’s non-performing loans fully covered by reserves. Profitability metrics also improved due to lower funding costs as well as gradual reduction of credit costs.

Furthermore, the capital adequacy increased thanks to internal capital generation. As of 31 December 2016, the bank reported a ratio of 15.3%, an increase from 12.3% reported in 2014and 11.4% in 2013 according to Moody’s methodology. Alfa-Bank also improved its liquidity profile owing to higher reliance on a relatively sticky and granulated deposit base. Along with a maintenance of a very large liquidity cushion: the share of liquid assets is around 30% of total assets at year-end 2016, the bank decreased reliance on market funding to around 20% of assets at year-end 2016.

Moody’s considers Alfa-Bank to be of systemic importance in Russia, and believes there is a moderate probability of support for the bank’s senior unsecured debt and deposits from the government of Russia. However, given the upgrade of the bank’s BCA to a level closer to the sovereign rating, this no longer results in rating uplift for Alfa-Bank’s Ba2 senior unsecured ratings. As a result, Moody’s affirmed the bank’s Ba2 local- and foreign-currency deposit and senior unsecured ratings.

Now Alfa-Bank’s rating is the highest among Russian private banks.