IBI-Rating has upgraded the credit ratings of «MIKHAILOVSKY BANK» and series A and B bonds from uaВВВ- to uaВВВ grade

IBI-Rating informs on upgrading of the credit rating of «MIKHAILOVSKY BANK» PJSC and the credit rating assigned to registered coupon bonds of series A and B of the Issuer «MIKHAILOVSKY BANK» PJSC from uaBBB- to uaBBB grade, upgrading the ratings outlook from "stable" to "positive".

Upgrading of the credit ratings is due to growth rates of the Bank’s key performance indicators, which demonstrates a significant positive trend in spite of the unstable situation in the country and the Bank's activity in the risky segment (consumer credit), as well as maintaining high regulatory capital ratios of «MIKHAILOVSKY BANK» PJSC, as evidenced by the sufficient actual value of regulatory ratio of capital adequacy. Capital provides partial coverage of credit and investment risks. «MIKHAILOVSKY BANK» PJSC meet its obligations to creditors in a timely manner and in full. The actual values of liquidity ratios are at a sufficient level. However, assets and liabilities are not properly balanced by terms to maturity and the negative gaps in certain periods as at 01.07.2015 accounted for over 10%, which increased the Bank's vulnerability to liquidity risk in these periods. At the same time, the implementation of credit and market risk may also put pressure on the Bank's liquidity. It should be noted that in the analyzed period certain deterioration in asset quality was observed, which was reflected in the increased amount of overdue debts, still their share in the customer loan portfolio remained low. At the same time there was the Bank's dependence on the financial condition of major borrowers, which increased the Bank’s vulnerability to credit risk. Also, the impact of susceptibility to financial risks may increase as a result of the persistence of negative trends in the economy and reduced solvency of borrowers.

The main sources of funding of assets are amounts due to customers and the owner’s funds. The available concentration of the resource base by major creditors increases the Bank’s vulnerability to liquidity risk. Also, given the country’s current situation, a significant amount of funds of individuals represents a potential threat to deteriorating of liquidity due to decreasing confidence of the population in the banking system. However, the rating agency «IBI-Rating» did not reveal any significant complaints from the customers to the Bank’s operations. Based on the results of the 1st half of 2015 the Bank's activity was profitable. And due to an increase in net operating income and a decrease in contributions to provisions for reserves, the Bank’s performance indicators have grown and are now at an acceptable level.

A positive impact on the rating of bank deposit reliability may have the following: reduced dependence on the financial condition of the Bank's major borrowers, reduced concentration of the resource base by creditors, as well as the implementation of the main directions of the Bank’s development strategy. A negative impact on the rating of bank deposit reliability may have the following: deterioration of the Bank’s solvency (liquidity), the implementation of credit risk due to deterioration in servicing of the granted loans, increased vulnerability of the Bank to market risks, loss-making operations, as well as the deterioration of the political and economic situation in the country.

In order to carry out the analytical research the materials provided by «MIKHAILOVSKY BANK» PJSC were used, including the annual financial statements for the period 2013-2014 and the 1st half of 2015, target performance indicators for the the IInd half of 2015, other necessary internal information as well as the information from public sources, which the rating agency considers reliable.

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