S&P revised Alfa-Bank outlook on ‘BB+/B’ to Positive on resilient earnings

S&P Global Ratings revised its outlook on Alfa-Bank to Positive from Stable. The long-term credit rating of the Bank was affirmed at the level of BB+.

The rating agency noted that Alfa-Bank’s operating performance was resilient through 2020, with a return on assets (ROA) of about 2.2% and a cost-to-income ratio below 38% which compares favourably with those of the bank’s Russian and international peers. S&P believes the bank will follow a balanced approach to risk taking, and its asset quality metrics are likely to remain better than the system average. The bank’s non-performing loans (stage 3 and purchased or originated credit-impaired loans) stood at 4.1% as of year-end 2020, compared with the S&P system-wide estimate of 8% at the same date. Alfa-Bank’s cost of risk is below the system average, despite COVID-19 pressures and recent fast growth in the retail segment. S&P notes the Alfa Banking Group’s efficient risk management framework and its very swift and proactive reaction to collateral foreclosure, which supports high quality of assets, even in the currently challenging operating conditions.

Due to its well-established market positions and advanced digitalisation, the bank also increased its number of corporate and retail clients, and significantly raised its net fee and commission income. The bank’s fees and commissions now almost fully cover operating expenses.

S&P notes that Alfa-Bank’s earnings buffer is stronger than that of its peers, which indicates that Alfa-Bank has greater capacity to cover normalised losses than peers, and this continues to support its capital base.

The Positive outlook on Alfa-Bank reflects S&P's expectation that Alfa-Bank will remain an outperformer in its peer group in terms of earnings generation capacity and capital build-up over the next 12-18 months, successfully navigating challenges related to COVID-19 pandemic.

The outlook on Alfa-Bank’s holding company ABH Financial Ltd was also revised to Positive from Stable with BB- rating affirmed.

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