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Standard & Poor's downgraded RCB's long-term issuer rating from BB- to B + and set it negative, citing the effects due to the lack of support from Russian VTB and, secondarily, effects on economic activity in Russia, including As part of the bank's management's efforts to protect it from financial sanctions imposed on Russia over its invasion of Ukraine, VTB has sold its stake. to RCB (46.3% of the share capital) to the Cypriot shareholders of the bank.
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its largest shareholder), borrowing and, secondarily, the potential impact of Russian economic activity, including deposit outflows, “said S & amp. Ps.
He noted that the negative monitoring “reflects our view that the potential further deterioration of the sanctions situation in Russia could have a negative impact on the RCB's financial profile.” RCB has been hedged through a mix of precautionary measures with the sale of VTB's stake contributing to the easing of RCB's financial profile, while RCB's capitalization and risk profile have been somewhat improved through the settlement of a loan to Kazakhstan, which of 30% of its loans.
As a result, the house estimates that the risk-weighted capital ratio is significantly over 10%, while the loan portfolio is diversified, provided that there will be no additional shocks that will affect the bank. It also notes that the bank has increased its long-term financing through the issuance of a € 200 million subordinated bond and a € 300 million regular term deposit (both from VTB), which offer a “cushion” for outflow of customer deposits./p>
Stresses, however, that “RCB 's business prospects and the viability of its business model will be adversely affected by the stand-alone model”, implying the severance of the relationship with VTB.
< p>“Without VTB's support for business development, the bank will have to restructure its business strategy. In our opinion, this will take time and may be complicated due to the limited network of the bank “, adds S & amp. Ps.
At the same time, he points out that the reduced volume of loans, which fell by more than 30 % due to the settlement of the bank's largest loan in January 2022 and the volatility in market conditions are likely to burden the bank 's profitability prospects in the next 12 to 18 months.
“RCB's share in Cyprus is limited in relation to the two largest players (approximately 8% of loans in Cyprus). “Also, its focus on specialized areas may increase the business profile of the effects of the conflict between Russia and Ukraine.”The house stresses that RCB ratings may be under additional pressure “given the uncertainty from various factors”. He adds that the expected supervisory approval of the change of the share structure by the Single Supervisory Mechanism, the potential changes in the capital management policy based on a new business plan, the possible new outflows of deposits or in a more extreme scenario the supervisory sanctions could be evaluated. According to the company, the negative monitoring reflects the view that the growing geopolitical and economic risks in the Russian economy could affect the outflow of customer deposits and the financial profile of the RCB, as well as the expected supervisory approval of the change in the bank's shareholding structure and any potential governance risks that could arise from the historical links between RCB and VTB.
Finally, the house notes that it will end the negative monitoring if has more insight into the full macroeconomic impact of sanctions against of Russia and related entities, the evolution of the geopolitical conflict, as well as the picture in the instability of customer deposits in the RCB and the supervisory approval of the change of the share structure.