"The rating upgrade reflects Rosbank's improved capitalization following the recent Tier 1 capital increase; completed legal and organizational integration of the OVK banking group; and expectations of higher sustained core profitability in the medium term," S&P credit analyst Irina Penkina said.
"The ratings remain constrained by Rosbank's sizable concentration in loans and funding, low operating efficiency, challenges in managing an extensive distribution network, untested quality of the fast-growing retail portfolio, and Russia's high operating risks," the agency said.
"The stable outlook reflects Standard & Poor's expectations that, in the beneficial macroeconomic environment, Rosbank will be able to reach a sustainable improvement in its core profitability due to a double effect of higher margin from retail lending, and cost-cutting initiatives," S&P added.
"If the bank demonstrates its ability to withstand the competitive pressure on recurrent profitability better and maintains good asset quality, this could lead to an upgrade," Penkina said.
"The ratings could be lowered if the bank is unable to control the quality of its lending, which is growing quickly in the current favorable economic environment; to reap satisfactory financial benefits from its enlarged distribution base and infrastructure following the OVK integration; and if there is a discontinuation of financial support from the Interros group to support the bank's rapid growth in a financial or economic stress scenario."
Rosbank is one of Russia's 30 largest private banks owned and controlled by Interros, Russia's largest non-energy Financial Industrial Group.
"In 2005, Rosbank completed the consolidation of its sister banking group, OVK, thereby adding retail operations to its traditional large corporate focus," S&P said.
