The prestigious Moody's international rating agency awarded Ameriabank the following ratings.
B1 rating of long-term deposits in national currency,
B2 rating for long-term deposits in foreign currency,
long-term counterparty risk rating Ba3.
The B1 rating of long-term deposits in national currency has a positive outlook based on the positive outlook of the B1 rating of government debt.
B2 rating of long-term foreign currency deposits is the maximum possible rating for Armenian banks, limited by the maximum threshold of foreign currency deposits of the Republic of Armenia. The rating has a stable outlook.
Rating justifications
The rating of long-term deposits in national currency awarded to Ameriabank reflects:
the bank's diversified business directions and strong positions in the local market
improved asset quality and ability to absorb potential losses due to adequate capital buffers, high profitability and adequate NPL coverage;
sufficient level of liquidity and diversified sources of attracting funds. At the same time, Ameriabank's rating is limited by Armenia's macroeconomic indicators and the significant share of loans in foreign currency.
According to Moody's, Ameriabank's asset quality will remain generally stable for the foreseeable future, given the improvement in economic conditions and Moody's expectations that in 2018-2019 the national currency will be stable.
When setting the ratings, Moody's based a number of important indicators. In particular, the share of non-performing loans in the total loan portfolio decreased. As of 31.03.2018, that indicator was 3.9%, compared to 2017. compared to 4.1% at the end of the year, the coverage ratio of problem loans in 2018 in the first quarter was 87%, in 2017 compared to 57% at the end of the year. At the same time, the share of foreign currency loans at the end of the year was high at 82%, which leads to the sensitivity of asset quality to exchange rate fluctuations. But on the other hand, a significant part of these borrowers are exporters who provide foreign currency income, which partially reduces the credit risk arising from exchange rate fluctuations.
Moody's also highlighted the fact that Ameriabank has a diversified shareholding structure and can attract additional capital if necessary. In particular, thanks to the investment of the Asian Development Bank in 2018 The bank's equity capital was replenished with USD 30 million. Normative index of capital adequacy in 2018. in the first quarter was 14.05%, and in accordance with the requirements of Basel I - around 19%. 2018 in the first quarter, the bank's net profit was AMD 2.56 billion (56% increase compared to the same period in 2017). As a result, the average annual return on assets was 1.5%, the return on capital was 13.4%.
Moody's expects that the Bank's profitability growth trend will be maintained in the foreseeable future, in the next 12-18 months, due to the fact that the Bank's credit strategy will be focused on the development of more profitable retail banking operations.
Moody's also noted that the Bank's liquidity and leverage will be stable over the next 12-18 months due to well-diversified liabilities, a large pool of liquid assets and alternative sources of liquidity (such as funds from international financial organizations). Moody's also highlights that customer funds are around 64% of the Bank's liabilities, half of which are retail deposits. The bank has a sufficient liquidity reserve consisting of funds and government securities, which in 2018 accounted for more than 22% of total assets in the first quarter.
Ameriabank's national currency long-term deposit global B1 rating (GLC) includes Moody's assessment that the probability of government support if necessary is high due to the fact that Ameriabank is a systemically important bank with a large customer base and large market share ( 17% according to loans to customers, 13% according to customer deposits). On the other hand, this support does not imply an increase in the global rating in national currency, as the bank's basic credit rating (BCA) is already equal to Armenia's B1 rating.
Positive rating outlook
The B1 rating of long-term deposits in the national currency of the bank has a positive outlook, which coincides with the positive outlook of the B1 rating of the RA state debt.