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Moody's Interfax downgrades Tatfondbank's national scale rating to

London, 30 October 2015 -- Moodys Interfax Rating Agency has today downgraded national scale long-term deposit rating (NSR) of Tatfondbank to from The NSR carries no specific outlook. The rating action was driven by accelerated pressure on the banks financial fundamentals, in particular volatile liquidity, and weak profitability.

Please see ratings tab on the issuer/entity page on for information on Global Scale Rating.


The downgrade of Tatfondbanks ratings reflects intensified pressure on the banks financial profile from the deteriorated operating environment, particularly on its funding and liquidity position, and profitability.

Tatfondbanks liquidity tends to be volatile, subject to market debt repayments and/or client deposit outflows. As of October 1, 2015, liquid assets excluding pledged securities decreased to 10.9% on an unconsolidated basis under local GAAP (15.9% as of July 1, 2015), which we consider to be limited in the context of the banks vulnerable funding base. The bank has material deposit concentrations, with the top 20 largest customers accounting for 35% of the banks deposit base, which makes liquidity volatile, in the case of large client outflows. Market funds amounted to 32.7% of the banks assets as of H1 2015, mainly comprised of local bond issues (RUB19 billion), CBR funding (RUB17.3 billion), placements of other banks (RUB13.8 billion) and eurobond issues of $70 million (RUB 5.6 billion).

Tatfondbanks asset quality is under pressure from challenging market conditions. As a measure of problem loans, we consider the share of non-performing loans (NPLs -- loans overdue more than 90 days) and restructured loans, which otherwise would be overdue or impaired (annual data under IFRS). These problem loans increased to 14.3% as of H1 2015 from 10.6% at year-end 2014. At the same time, NPLs 90+ accounted for 4.8% as of H1 2015, up from 4.3% as of year-end 2014. Loan loss reserves (LLRs) of 12.9% of gross loans provide 90% coverage over problem loans. We note the high share of unsecured loans in the corporate loans book at around 50% and material exposure to financial service companies (mainly securities trading) at 19% as of H1 2015, which renders the bank vulnerable to financial market performance. Tatfondbanks cost of risk for the total loan book amounted to annualized 3.4% in H1 2015 and given negative trend in asset quality we expect further provisioning to pressure profitability.

We forecast the bank to be loss-making at the end of 2015, constrained by squeezed net interest margins (NIM) and heightened credit costs. The surge of the Central Bank of Russias key interest rate to 17.0% in December 2014 resulted in a two-fold growth of Tatfondbanks interest expenses. Following the maturing of expensive deposits by end of H1 2015, the NIM started to recover slightly -- being positive but at only 0.2% as of H1 2015 under consolidated IFRS. However, the bank remains loss-making on a pre-provision basis.

While Tatfondbanks loss absorption capacity is weak given poor internal capital generation, its capitalisation has been supported by shareholders. In July-August 2015, Tatfondbank received subordinated loans of RUB2.4 billion from the entities affiliated with the Republic of Tatarstan. Of these, RUB2.1 billion will be transferred into Tier1 capital by the end of October 2015, as well as a new capital injection with a total Tier 1 capital increase of RUB4 billion. In addition, Tatfondbank was included in a list of 10 Russian regional banks eligible for participation in a state program for banks recapitalisation through federal loan bonds (OFZ), under which it will receive funds of around RUB1.8 billion to be included in Tier 2 capital under local regulation by the end of 2015.


We believe that there is a moderate likelihood of support for Tatfondbank from the government of Tatarstan and its related companies. Our opinion is based on Tatfondbanks notable market position in the domicile region of Tatarstan (26% in retail deposits, 17% in assets), around 30% indirect ownership by the regional government through affiliated companies after the capital injection, and the banks track record of support, including its recent capital injection.


The principal methodology used in this rating was Banks published in March 2015. Please see the Credit Policy page on for a copy of this methodology.

Moodys Interfax Rating Agencys National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moodys global scale ratings in that they are not globally comparable with the full universe of Moodys rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a .nn country modifier signifying the relevant country, as in .ru for Russia. For further information on Moodys approach to national scale ratings, please refer to Moodys Rating Methodology published in June 2014 entitled Mapping Moodys National Scale Ratings to Global Scale Ratings.


Moodys Interfax Credit rating Agency (MIRA) specializes in credit risk analysis in Russia. MIRA is a joint-venture between Moodys Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and the Interfax Information Services Group. Moodys Investors Service is a subsidiary of Moodys Corporation (NYSE: MCO).


For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moodys rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support providers credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see for any updates on changes to the lead rating analyst and to the Moodys legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on for additional regulatory disclosures for each credit rating.

Maria Malyukova
Asst Vice President - Analyst
Financial Institutions Group
Moodys Interfax Rating Agency
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Moscow 125047
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Yves Lemay
MD-Banking Sovereign
Financial Institutions Group
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Moodys Interfax downgrades Tatfondbanks national scale rating to