November 03, 2014 at the meeting of the Rating committee of RA “Expert-Rating” it was decided to upgrade the long-term national Ukrainian scale rating of PJSC «ALFA-BANK» (23494714) to the level uaAAA. Bank or separate bond instrument with rating uaAAA is characterized by the highest solvency compared to other Ukrainian borrowers or bond instruments.

At the same time, at the meeting of the Rating committee it was decided to assign a long-term credit rating to the bonds of PJSC «ALFA-BANK» Series M, N, O, P at the level uaAAA. Bonds of the above mentioned Series are registered by NSSMC in October of 2014 for the total amount of UAH 3 bln.

Making decision to upgrade the rating, the Agency was guided by the results of the Bank’s activity for the first 9 months of 2014, as well as by the data on the fulfillment by PJSC «ALFA?BANK» of its obligations under the syndicated loan.

             1. For the period from 01.01.2014 to 01.10.2014 key balance sheet indicators of PJSC «ALFA-BANK» have demonstrated multidirectional dynamics:

• Shareholders’ equity of the Bank has decreased by 0.04% (for the first 6 months the equity has grown by 0.03%);
• Liabilities of PJSC «ALFA-BANK» have grown by 32.19% (for the first 6 months by 23.73%);
• Assets of the Bank have grown by 27.57% (for the first 6 months by 20.33%);
• Gross loans and advances to customers of the Bank have grown by 20.15% (for the first 6 months by 17.73%).

Table 1 Key balance sheet indicators of PJSC «ALFA-BANK» according to the results of the first 9 months of 2014 UAH ths, %, p.p.

Indicators	01.10.2014	01.01.2014	Change	Growth rate, %
Shareholders’ equity	4 197 180	4 198 789	-1 609	-0.04%
Share capital	4 639 121	4 639 121	-	-
Shareholders’ equity/Assets ratio, %	11.23%	14.33%	-3.10 p.p.	-
Total liabilities	33 184 649	25 103 457	8 081 192	32.19%
Including liabilities in foreign currency	22 922 463	16 342 938	6 579 525	40.26%
Due to banks	6 206 074	4 607 800	1 598 274	34.69%
Due to individuals	9 535 476	9 258 256	277 220	2.99%
Due to legal entities	6 013 970	6 579 432	-565 462	-8.59%
Total assets	37 381 829	29 302 246	8 079 583	27.57%
Liquid assets (Cash and cash equivalents + Mandatory reserves with NBU + Trading securities + Due from other banks)	8 239 424	6 184 819	2 054 605	33.22%
Gross loans and advances to customers	26 444 459	22 008 944	4 435 515	20.15%
Provision for loan impairment	2 959 088	1 784 135	1 174 953	65.86%
Provision for loan impairment/Gross loans and advances to customers ratio, %	11.19%	8.11%	3.08 p.p.	-
Securities available for sale	1 212 100	990 955	221 145	22.32%
Liquid assets/Liabilities ratio, %	24.83%	24.64%	0.19 p.p.	-

Source: data of PJSC «ALFA-BANK», calculations by RA «Expert-Rating»

            Key components of the resource base of PJSC «ALFA-BANK» in hryvnia equivalent in the period from 01.01.2014 to 01.10.2014 have changed as follows:

• Due to individuals has increased by 2.99%;
• Due to legal entities has decreased by 8.59%;
• Due to banks has grown by 34.69%. 

            The above mentioned statistics indicate that in the period from 01.01.2014 to 01.10.2014 PJSC «ALFA-BANK» managed to further develop the same trends as in the first half of 2014: on the back of almost flat volume of the shareholders’ equity, the Bank has increased liabilities stabilizing the key components of the funding base in hryvnia equivalent.

            2. In the period from 01.01.2014 to 01.10.2014 the capitalization normative indicators of PJSC «ALFA-BANK» (N1, N2 and N3) have demonstrated a multidirectional dynamics:

• The regulatory capital of the Bank (N1) has increased by 8.33%;
• The normative value of the regulatory capital adequacy ratio (N2) has decreased by 3.24 p.p.;
• The normative value of the regulatory capital to total assets ratio (N3) has reduced by 2.70 p.p. 

            Despite the decrease of N2 and N3, their values as at 01.10.2014 complied not only with a great reserve with respect to the limits set by NBU, but N3 was even higher than the average of this normative indicator across the system. The decrease in the capitalization normative indicators of the Bank corresponded to the general trend across the banking system in the context of the decrease in the averages of N2 and N3 across the system.

Table 2 Key normative indicators of PJSC «ALFA-BANK» according to the results of the first 9 months of 2014 UAH ths, %, p.p.

Normative indicators	The normative value limit set by NBU	01.10.2014		01.01.2014		Change,  UAH ths, p.p.
		The Bank’s normative value	The average of the system	The Bank’s normative value	The average of the system
Regulatory capital (N1), UAH ths	Not less than UAH 120,000 ths	5 548 068	-	5 121 222	-	426 846
Regulatory capital adequacy ratio (N2), %	Not less 10%	15.77%	15.96%	19.01%	18.26%	-3.24 p.p.
Regulatory capital/Total assets ratio (N3), %	Not less 9%	13.81%	12.30%	16.51%	13.98%	-2.70 p.p.
Instant liquidity ratio (N4), %	Not less 20%	169.77%	43.94%	177.92%	56.99%	-8.15 p.p.
Current liquidity ratio (N5), %	Not less 40%	124.95%	79.53%	148.70%	80.86%	-23.75 p.p.
Short-term liquidity ratio (N6), %	Not less 60%	87.65%	86.75%	79.89%	89.11%	7.76 p.p.
Normative indicator of large loan risks (N8), %	Not more 800%	252.72%	246.46%	219.64%	172.05%	33.08 p.p.
Normative indicator of the maximum amount of loans, guarantees and sureties issued to the insiders (N10), %	Not more 30%	0.60%	1.45%	1.78%	1.63%	-1.18 p.p.

Source: data of PJSC «ALFA-BANK», NBU, calculations by RA «Expert-Rating»

             The liquidity normative indicators of PJSC «ALFA-BANK» as in the first half of 2014 have shown a multidirectional dynamics, but they further significantly exceeded the banking system’s averages:

• Instant liquidity ratio normative indicator of the Bank (N4) has decreased by 8.15 p.p. down to 169.77% while the system’s average value reached 43.94%;
• Current liquidity ratio normative indicator (N5) has decreased by 23.75 p.p. down to 124.95% while the system’s average value reached 79.53%;
• Short-term liquidity ratio normative indicator of the Bank (N6) has grown by 7.76 p.p. up to 87.65% while the system’s average value reached 86.75%.

            Therefore, on 01.10.2014 PJSC «ALFA-BANK» has continued to maintain a very large reserve of the instant and current liquidity, as well as a noticeable reserve of the short-term liquidity.

 3. In the first 9 months of 2014, PJSC «ALFA-BANK» has received a net profit in the amount of UAH 0.98 mln. The declining trend in net profit volumes for the first 9 months of 2014 corresponds to the general trend across the banking system. The Agency positively assesses the very fact that the Bank’s activity was profitable during the difficult for the Ukraine’s economy period.

At the same time, the Agency positively assesses the increase in net interest income and net fee and commission income of PJSC «ALFA-BANK» in the first 9 months of 2014 by UAH 76.58 mln and UAH 145.42 mln, correspondingly. The above mentioned statistics confirms that in the difficult period of 2014 PJSC «ALFA-BANK» has managed to increase the key items of income.

Table 3 Selected indicators of income and expenses of PJSC «ALFA-BANK» UAH ths, %, p.p.

Indicators	9 months of 2014	9 months of 2013	Change	Growth rate. %
Net interest income	1 259 253	1 182 671	76 582	6.48%
Net fee and commission income	493 768	348 348	145 420	41.75%
Net fee and commission income/Net interest income ratio	39.21%	29.45%	9.76 p.p.	-
Gains less losses from operations with securities in the trading portfolio of the bank	487 941	-1 131	489 072	-
Gains less losses from operations with foreign currency	-10 291	58 469	-68 760	-
Administrative and other operating expenses	1 231 311	1 029 026	202 285	19.66%
Net profit	979	10 603	-9 624	-90.77%
ROE, %	0.02%	0.25%	-0.23 p.p.	-

Source: data of PJSC «ALFA-BANK», calculations by RA «Expert-Rating»

24 October 2014, Alfa-Bank Ukraine fully and timely repaid a syndicated loan in the amount of USD 72.5 mln, attracted 24 October 2013. The Agency positively assesses the timely repayment of the syndicated loan. In difficult economic conditions, this confirmed a high level of solvency and financial stability of PJSC «ALFA-BANK», which now are regulated not only by financial indicators of the Bank, but are also proven in practice.

Making decision to upgrade the long-term credit rating of PJSC «ALFA-BANK» to the highest possible level (uaAAA), the Agency was guided by the following conclusions:

• Capitalization normative indicators of PJSC «ALFA-BANK» despite a decrease had a noticeable reserve with respect to the limits, set by NBU, the Bank in the foreseeable future didn’t require additional capitalization, although the level of shareholders’ support remained very high;
• Normative indicators of instant and current liquidity during the 2014 and as at 01.10.2014 were complied with a very great reserve with respect to the averages of these normative indicators across the banking system. According to the Agency’s estimations, during the whole crisis period of 2014 the liquidity of PJSC «ALFA?BANK» was at a sufficient level;
• Despite a deterioration of conditions of running banking business in Ukraine, for the first 9 months of 2014, PJSC «ALFA-BANK» increased its net interest income, net fee and commission income and its activity remained profitable;

24 October 2014, PJSC «ALFA-BANK» fully and timely fulfilled its obligations in foreign currency to external investors that is confirmed in practice via the highest possible level of solvency and financial stability of the Bank.

Confirmation of the credit rating of PJSC «ALFA-BANK» - 03.11.2014 (english version)