As noted in the rating commentary by S&P, Russia has demonstrated a commitment to conservative macroeconomic policies, which is likely "to support a strong external and fiscal balance sheet." “A flexible exchange rate will allow the economy to cope with shocks that could be caused by tightening sanctions and lower commodity prices,” the agency said.
“The rating action reflects a prudent policy that allowed Russian economy adjust to lower commodity prices and international sanctions,” S&P said in a release. In addition, the agency noted the actions of the Bank of Russia, which, despite the cleaning of the banking system, allowed maintaining financial stability.
The problems of the economy have not gone away
However, one should not flatter oneself: the Russian sovereign rating, according to S&P, has only caught up with the ratings of Kazakhstan, India and Indonesia, and S&P is extremely cautious in assessing Russian economic prospects. The agency forecasts low economic growth rates (1.7-1.8% until 2021, while the Russian government expects growth faster than 2%) amid unfavorable demographics (population aging, shrinking working-age population) and weak labor productivity. Structural barriers to productive growth include "the dominant role of the state in the economy, investment climate and relatively low levels of competition and innovation,” notes S&P.
At the same time, the agency highlights Russia's jump in the World Bank's Doing Business ranking from 120th position a few years ago to 35th, as well as initiatives Russian government to increase labor productivity and increase investment.
Fitch, in turn, notes "a strong sovereign balance sheet, robust external factors and improved economic policy in relation to macroeconomic indicators." At the same time, the agency points to "structural weaknesses (dependence on commodities and management risks), as well as geopolitical contradictions." Fitch expects the economy to grow at a CAGR of 2% in 2018-2019 on the back of reduced uncertainty, monetary easing and stable oil prices. The average economic growth for the investment category BBB is 3.1%.
What will happen after the presidential elections?
S&P also touches on political issues in the commentary. The high approval ratings of the authorities could allow the state to make unpopular reforms, the agency believes, but does not believe in the reality of such a choice. The Russian authorities have spoken a lot before, for example, about privatization and demonopolization of the economy, but deeds differed from words, S&P writes, not expecting a significant reduction in the role of the state in the economy. “Russia has a weak system of checks and balances between institutions and a high centralization of power. We have seen this in recent restrictive action against independent media and increased barriers to genuine political participation,” S&P points out. And he warns that while macroeconomic stability is likely to continue after the March 2018 presidential election, “the uncertainty surrounding the future transition of power could undermine the predictability of policy priorities.”
Fitch also notes uncertainty about "the main elements and timing of a broader reform agenda" after the presidential election. “President Vladimir Putin is on track to win the presidential election again in March 2018,” the agency points out.
Senior Emerging Markets Analyst management company Manulife Asset Management Richard Segal told RBC on the eve of the S&P decision that Russia is in favor of stabilizing economic growth, low inflation, reducing the budget deficit and that "the economy has become more flexible due to the depreciation of the ruble and the introduction of a new, clearer budget rule." Against Russia are such factors as limited growth potential of the economy, problems and risks in the banking sector, about 70% of which is again controlled by the state, shortcomings corporate governance(recent example - ) and the uncertainty of the political landscape in the future three years, said Segal.
Inflow into Russian securities
Russia's return to the investment rating category means that Russian sovereign Eurobonds will be able to return to global debt indices such as Bloomberg's Barclays Global Aggregate. In February 2015, Barclays excluded Russian external debt from the family of these indices, which caused those institutional investors who follow the indices to lose the ability to buy or hold Russian Eurobonds. S&P's decision "will make it possible to expand the participation in the Russian debt market of such conservative institutional investors as foreign pension funds and Insurance companies”, said Finance Minister Anton Siluanov.
Now about a third of Russian government bonds (both ruble OFZs and Eurobonds) are owned by foreign investors. Societe Generale estimated that an upgrade of the Russian rating to investment grade could trigger an inflow of $1-2 billion into Russian Eurobonds, Bloomberg reported.
Credit rating is an independent and reliable assessment of an issuer's creditworthiness, on the basis of which market participants can make informed financial decisions. This may entail a reduction in the issuer's costs of raising borrowed funds. For those issuers that raise funds against third-party guarantees, a credit rating may reduce the cost of such a guarantee or raise funds more efficiently without purchasing a guarantee.
In recent decades, credit ratings have become a universally recognized and convenient benchmark for determining the degree of creditworthiness of federal governments, regional administrations, banks, and non-financial companies. An objective assessment of the solvency of economic entities by independent experts is in modern business practice the same necessary element of doing business and government controlled like regular audits.
A credit rating is often used by banks and other financial intermediaries to make lending decisions, money market transactions, insurance, leasing, and any other situation where an assessment of a business partner's creditworthiness is required. Many companies choose not to disclose their financial information during business negotiations. In this case, the issuer's credit rating serves as a reliable benchmark of creditworthiness.
Credit rating- one of essential tools increasing the attractiveness of borrowers in the eyes of creditors, allowing them to receive an objective and understandable indicator financial condition borrowers. The independence of the rating agency from financial market participants contributes to increasing confidence in the borrower.
A credit score facilitates the underwriting process. Investment banks and other financial intermediaries operating in the bond market may use a credit rating when planning and placing bond issues.
Principles for the provision of rating services
Independence: A credit rating is an independent opinion of a rating company on the issuer's creditworthiness. The independence of Standard & Poor’s opinion from the interests of any market participants, state and commercial organizations- one of the most important guarantees of objectivity and impartiality of credit ratings. Along with the high quality of analytics, independence determines the accuracy of Standard & Poor's credit ratings.
Publicity of analytical criteria: a key practice that gives investors a complete understanding of Standard & Poor's analytical approaches to risk assessment. All Standard & Poor's criteria are available at various languages, including Russian, and posted on the Standard & Poor’s website.
Collegiality: a decision-making procedure that eliminates any possibility of manipulating the opinion of analysts responsible for the analysis of a particular issuer. The rating committee is the most important mechanism in the process of assigning a credit rating, which guarantees the impartiality of analysts' assessments, quality control and the futility of pressure on the opinion of analysts from outside. The rating committee is formed from specialized specialists, depending on the industry and other characteristics 5-9 of the issuer. The task of the rating committee includes a detailed discussion of the rating report for this issuer and the assignment of a rating at a certain level by voting.
Interactivity: the principle on the basis of which interaction with the issuer is built in the process of assigning a credit rating and subsequent monitoring of it. Based primarily on information received from the issuer itself, a painstaking, detailed discussion of all possible situations that could affect its creditworthiness. Interactivity implies regular meetings with the issuer's management and constant informational contact, which makes it possible to promptly respond to ongoing changes.
Information privacy: a fundamental condition of work that allows the issuer to guarantee non-disclosure of confidential information transferred to analysts and disclosure of the rating only with the consent of the issuer.
Use of rating scales: the scale makes it possible to compare issuers of different economic nature (corporations, regions, municipalities, banks, insurance companies, etc.) in terms of credit risk, and takes the issuer and its obligations out of the narrow industry context.
Ongoing research into default probability: are carried out on the basis of a wide statistical sample for all rating categories to control the quality of the rating opinion and (if necessary) adjust the methodology.
Rating agencies
Moody's Interfax Rating Agency
Moody's Interfax Rating Agency is a universal rating agency that provides a full range of rating services for all sectors of the economy.
Aaa.ru- issuers, or debt obligations with a rating of Aaa.ru, are characterized by the highest creditworthiness in relation to other issuers in the country.
Aa.ru- issuers, or debt obligations with a rating of Aa.ru, are characterized by very high creditworthiness in relation to other issuers in the country.
A.ru- issuers, or debt obligations rated A.ru, have above average creditworthiness among other issuers in the country.
Baa.ru- issuers, or debt obligations with a rating of Baa.ru, represent the average level of creditworthiness among issuers in the country.
Ba.ru- issuers, or debt obligations rated Ba.ru, have a creditworthiness level below the average for issuers in the country.
b.ru- issuers or debt obligations rated B.ru have low creditworthiness relative to other issuers in the country.
Caa.ru- issuers, or debt obligations with a rating of Caa.ru, are characterized as speculative and have a very low creditworthiness relative to other issuers in the country.
Ca.ru- issuers, or debt obligations with a rating of Ca.ru, are characterized as highly speculative and have extremely low creditworthiness relative to other issuers in the country.
c.ru- issuers, or bonds rated C.ru, are characterized as highly speculative and have the lowest creditworthiness relative to other issuers in the country.
Moody's Interfax Rating Agency supplements the ratings of each category from aa before Caa indexes 1, 2 and 3. Index 1 indicates that the obligation has a higher rank in its rating category; index 2 indicates an average rank, and index 3 indicates a lower rank in that category.
Standard & Poor's
Issuer's credit rating according to the international scale Standard & Poor's expresses the current opinion on the general creditworthiness of the debt issuer, guarantor or guarantor, business partner, its ability and intention to timely and fully meet its debt obligations.
The credit rating of debt obligations according to the international scale Standard & Poor's expresses the current opinion on the credit risk for specific debt obligations (bonds, bank loans, loans, other financial instruments).
The values of credit ratings on the international scale Standard & Poor's include a long-term rating that assesses the ability of the issuer to fulfill its debt obligations in a timely manner. Long-term ratings range from the highest category - "AAA" to the lowest - "D". Ratings ranging from "AA" to "CCC" may be supplemented with a plus (+) or minus (-) sign indicating intermediate rating categories in relation to the main categories.
A short-term rating is an assessment of the likelihood of timely repayment of obligations that are considered short-term in the respective markets. Short-term ratings also range from 'A-1' for liabilities top quality up to "D" for the lowest quality commitments. Ratings within the 'A-1' category may contain a plus sign (+) to highlight stronger commitments in that category.
In addition to long-term ratings, Standard & Poor's has special ratings for preferred stocks, money market funds, mutual bond funds, the solvency of insurance companies and companies working with derivatives.
AAA- a very high ability to timely and fully meet their debt obligations; the highest rating.
AA— high ability to timely and fully meet their debt obligations.
A— Moderately high ability to meet its debt obligations on time and in full, but more sensitive to the impact of adverse changes in commercial, financial and economic conditions.
BBB— a sufficient ability to meet its debt obligations on time and in full, but greater sensitivity to the impact of adverse changes in commercial, financial and economic conditions.
BB- out of danger in the short term, but more sensitive to the impact of adverse changes in commercial, financial and economic conditions.
B— higher vulnerability in the presence of adverse commercial, financial and economic conditions However, at present there is an opportunity to fulfill debt obligations on time and in full.
CCC- on the this moment there is a potential for the issuer to default on its debt obligations; the timely fulfillment of debt obligations is largely dependent on favorable commercial, financial and economic conditions.
CC— at present, there is a high probability of default by the issuer of its debt obligations.
C— bankruptcy proceedings have been initiated against the issuer or similar action has been taken, but payments or performance of debt obligations continue.
SD- selective default on this debt obligation while continuing timely and full payments on other debt obligations.
D— default on debt obligations.
Stable - unlikely to change.
Developing - possible increase or decrease in the rating.
You can also determine the issuer's credit rating on the Russian Standard & Poor's scale. Russian issuers are understood to mean all issuers of debt obligations, guarantors and guarantors, insurance companies located in the territory Russian Federation or operating in the Russian financial markets. A business partner rating is a type of issuer credit rating.
An issuer's credit rating is not equivalent to the rating of its specific debt obligations, since it does not take into account the nature and security of a particular obligation, as well as its relative status in the event of bankruptcy or liquidation of the issuer and the protection of creditors' rights thereon. The creditworthiness of the guarantors, or guarantors, for specific obligations of the issuer, as well as other forms of credit risk mitigation, may provide the basis for an upgrade in the credit rating of the obligation relative to the issuer's credit rating.
The issuer's credit rating is not a recommendation as to whether to sell or buy the issuer's debt obligations, and is not an opinion on the market price of the debt obligations and on the investment attractiveness of the issuer for a particular investor. The credit rating is based on current information obtained from the issuer or from other sources that Standard & Poor's considers reliable. Standard & Poor's does not audit in connection with any credit rating and may occasionally rely on unaudited financial information. An issuer's credit rating may be changed, suspended or withdrawn as a result of any change in or lack of information, or for other reasons.
Issuer credit rating:
ruAAA. The issuer's rating of 'ruAAA' means the issuer's very high ability to timely and fully meet its debt obligations relative to other Russian issuers. This is the highest credit rating on the Russian Standard & Poor's scale.
ruA. An issuer rated 'ruA' is more exposed to adverse changes in commercial, financial and economic conditions than issuers rated 'ruAAA' and 'ruAA'. Nevertheless, the issuer is characterized by a moderately high ability to timely and fully meet its debt obligations relative to other Russian issuers.
ruBBB. The 'ruBBB' issuer rating reflects the issuer's sufficient ability to timely and fully meet its debt obligations relative to other Russian issuers. However, this issuer is more sensitive to adverse changes in commercial, financial and economic conditions than higher-rated issuers.
ruBB, ruB, ruCCC, ruCC. Issuers rated "ruBB", "ruB", "ruCCC" and "ruCC" on the Russian Standard & Poor's scale are characterized by high credit risk relative to other Russian issuers. Despite the fact that such issuers have some degree of reliability, they are more are subject to uncertainty and unfavorable factors compared to other Russian issuers.
ruBB. An issuer with a ruBB rating has less credit risk than Russian issuers with lower ratings. However, uncertainty or the impact of adverse changes in commercial, financial and economic conditions may result in an issuer's inability to meet its debt obligations in a timely manner and in full.
ruB. The 'ruB' issuer rating reflects a lower credit profile than the 'ruBB' rating. Currently, this issuer is able to fulfill its debt obligations on time and in full. However, unfavorable changes in commercial, financial and economic conditions are likely to prevent the issuer from meeting its debt obligations on time and in full.
ruCCC. The issuer's rating of 'ruCCC' means that at the moment, in the conditions of the Russian financial market, there is a potential possibility of default on its debt obligations. The timely fulfillment of debt obligations is largely dependent on favorable commercial, financial and economic conditions.
ruC. The ruC issuer rating is assigned when the issuer is subject to bankruptcy proceedings, a ban on its core business, a court decision is expected to impose a penalty on property, or in another similar case. In the process of litigation (or external management), the relevant body may decide to pay off part of the debt obligations and default on the remaining obligations. Standard & Poor's description of the credit rating of debt obligations provides a more detailed explanation of the possible impact of such decisions on the credit rating of specific debt obligations.
Rating «RUSD» in the conditions of the Russian financial market, it is assigned when Standard & Poor's believes that the issuer has defaulted on a particular issue or several issues of its debt obligations, but will continue to make timely and full payments on other debt obligations. In the description of the credit rating of Standard & Poor's debt obligations "s provides a more detailed explanation of the possible impact of such decisions on the credit rating of specific debt obligations.
Standard & Poor's specialized ratings are assigned to certain types of debt obligations, bank loans, investment projects and private placements valuable papers using the same scale as for other debt instruments. Private placement ratings include an assessment of the guarantees and collateral required to mitigate the risk of loss in the event of a default. Bank loan ratings serve the needs of the syndicated loan and project finance markets and include an assessment of the prospects for a lender to receive funds in the event of default, which is based on an analysis of the value of collateral or other protection mechanisms usually provided in such schemes.
Bank loans, private placements and other financial instruments such as guaranteed bonds, when well protected and able to adequately compensate the lender, may be rated higher than the issuer itself. In contrast, instruments that are inferior in priority to repayment of the issuer's principal debt are usually rated lower than the issuer's rating.
Many mutual fund managers use Standard & Poor's ratings assigned to managed funds to highlight the advantages of their bond and cash funds against competitors' funds. Ratings provide investors with information about the creditworthiness of funds and the level of quality of their management.
Structured instrument credit ratings include an assessment of:- the quality of the assets that are being securitized;
- payment structures;
- legal purity of transactions.
The use of structured instruments makes it possible to reduce credit risks by transferring securitized assets off the issuer's balance sheet.
The priority of tranches in the issuance of structured instruments allows the issuance of obligations with a credit quality higher than the credit quality of securitized assets.
Indicators of the state of stock markets are Standard & Poor's indices, used by investors around the world to evaluate the effectiveness of investments, as well as as a basis for a wide range of financial instruments, such as index funds, deposit products, futures, options and funds traded on exchanges ( ETFs). The S&P 500 index includes 500 leading companies in the leading sectors of the American economy and covers more than 80% of the shares American companies. The S&P Global 1200 index covers approximately 70% of the world's capital markets, includes seven of the most common indices, many of which are leaders in their regions. Standard & Poor's indexes are created as investment portfolio indexes that are representative of the market in a broad sense and at the same time have practical significance for investors.
Fitch Ratings
Ratings Fitch Ratings are opinions about the ability of issuers to meet their financial obligations on time or about the timely repayment of an issue of securities, including obligations such as interest payments, dividends on preferred shares or payments of principal. Ratings can be assigned to a wide range of issuers and securities, including states, governments, structured finance instruments and corporate issuers; debt obligations, preferred shares, bank loans and counterparties. Ratings can also assess the financial strength of insurance companies and financial guarantors.
Credit ratings are used by investors as indicators of the likelihood that payments will be made in accordance with the terms on which the investment was made. Thus, the use of credit ratings determines their function: investment grade ratings (international long-term "AAA" - "BBB"; short-term "F1" - "F3") indicate a relatively low probability of default, while ratings of speculative, or non-investment, ( sub-investment) category (international long-term "BB" - "D"; short-term "B" - "D") may indicate a higher probability of default or that a default has already occurred.
The ratings do not provide a definite forecast of the probability of default, however, it should be noted that over a long period of time, the default rate on US corporate bonds rated "AAA" has averaged less than 0.10% per year, while the default rate on bonds rated "BBB" reached 0.35%, and bonds rated "B" - 3.0%.
Issuers or issues of securities that are rated at the same level have similar, but not necessarily identical, creditworthiness because the rating categories do not fully reflect small differences in credit risk.
Credit ratings and research by Fitch Ratings are not recommendations to buy, sell or hold any security. The ratings do not constitute a commentary on the adequacy of the market price, the suitability of a particular security for particular investors, or the application of tax exemptions or tax treatment to any payments on any securities.
The ratings are based on information obtained directly from issuers, other obligors, underwriters, their experts and other sources that Fitch considers reliable. Fitch does not audit or verify the correctness or accuracy of such information. Ratings may be changed or withdrawn as a result of changes or unavailability of information, as well as for other reasons.
The ratings assigned to securities issuance programs refer only to the standard issues within the particular program. These ratings do not apply to all releases within the program. In particular, in the case of non-standard issues, i.e. those associated with third party credits or index performance, their ratings may differ from the rating of the corresponding program.
Credit ratings do not directly assess any risks other than credit risks. In particular, these ratings do not address the risks of loss due to changes in interest rates or other market factors.
Individual ratings assigned only to banks. The purpose of these internationally comparable ratings is to evaluate the bank if it were completely independent and could not rely on external support. These ratings measure a bank's exposure to risk, risk appetite and risk management and thus represent the agency's view of the likelihood of significant difficulties such that the bank will require support.
The main factors that the agency analyzes when evaluating a bank and determining the level of this rating include profitability and balance sheet integrity (including capitalization), client base and management, operating environment and development prospects. Finally, an important factor is policy consistency and the size of the bank (volume of own funds) and diversification (scale of activity in various sectors of the economy and geographical coverage).
An exceptionally stable bank. Among the characteristics of such a bank may be exceptionally high profitability and integrity of the balance sheet, very big size customer base and high quality management, exceptionally favorable operating environment and development prospects.
A stable bank with no significant concerns. Among the characteristics of such a bank may be high profitability and integrity of the balance sheet, a large client base and high quality management, favorable operating environment and development prospects.
A bank with adequate soundness that also has one or more concerns. There may be concerns about the profitability and integrity of such a bank's balance sheet, the size of its customer base and the quality of its management, operating environment or development prospects.
A bank that is characterized by certain shortcomings, both internal and related to external factors. There are concerns about its profitability and balance sheet integrity, customer base and management quality, operating environment or development prospects. Banks operating in emerging economies inevitably face a greater number of potential externalities-related shortcomings.
A bank that is experiencing very serious difficulties and that already needs or is likely to need external support.
Company `s logo
History of Standard & Poor's
Standard & Poor's traces its history back to 1860, with the publication of Henry Varnum Poor's book The History of railways and canals in the United States” (in History of Railroads and Canals in the United States). This book was an attempt to collect the most complete information about the financial and operating conditions of the US railroad companies. Together with his son Henry William, he created the HV and HW Poor Company and began publishing an updated version of this book every year.
In 1906, Luther Blake Lee founded the Standard Statistics Bureau to provide financial information on non-railway companies.
In 1941, Poor and Standard Statistics merged to form Standard & Poor's Corp. In 1966, S&P was acquired by McGraw-Hill and is currently responsible for the financial support of this division.
S&P credit ratings
S&P ratings on the international scale
The Standard & Poor’s international credit rating scale serves to meet the needs of participants in global (international) financial markets. Estimates on this scale make it possible to compare the reliability of issuers and obligations of different states.
Long-term credit ratings
Long-term ratings evaluate the issuer's ability to meet its debt obligations in a timely manner. The company's ratings are letter-coded, ranging from AAA, assigned to exceptionally reliable issuers, to D, assigned to an issuer that has declared default. There may be intermediate grades between AA and B, denoted by plus and minus signs (for example, BBB+, BBB and BBB-).
- AAA - the issuer has an exceptionally high ability to pay interest on debt obligations and the debts themselves.
- AA - the issuer has a very high ability to pay interest on debt obligations and the debts themselves.
- A - the issuer's ability to pay interest and debt is highly valued, but depends on the economic situation.
- BBB - the issuer's solvency is considered satisfactory.
- BB - the issuer is solvent, but adverse economic conditions may adversely affect the ability to pay.
- B - the issuer is solvent, but adverse economic conditions are likely to adversely affect its ability and willingness to pay debts.
- CCC - the issuer is experiencing difficulties with payments on debt obligations and its possibilities depend on favorable economic conditions.
- CC - the issuer is experiencing serious difficulties with payments on debt obligations.
- C - the issuer is experiencing serious difficulties with payments on debt obligations, bankruptcy proceedings may have been initiated, but payments on debt obligations are still being made.
- SD - the issuer refused to pay for some obligations.
- D - A default has been declared and S&P believes that the issuer will default on most or all of the obligations.
- NR - not rated.
Short-term credit ratings
Short-term ratings assess the likelihood of timely repayment of short-term debt obligations. Standard & Poor's short-term debt credit ratings are alphanumeric, ranging from the highest A-1 to the lowest D. Stronger A-1 bonds may be marked with a plus sign. Grades from category B can also be adjusted with a figure (B-1, B-2, B-3).
- A-1 - the issuer has an exceptionally high ability to repay this debt obligation.
- A-2 - the issuer has a high ability to repay this debt obligation, but these opportunities are more sensitive to adverse economic conditions.
- A-3 - adverse economic conditions are likely to weaken the issuer's ability to repay this debt.
- B - the debt obligation has a speculative character. The issuer has the ability to redeem it, but these opportunities are very sensitive to adverse economic conditions.
- C - the issuer's ability to repay this debt obligation is limited and depends on the availability of favorable economic conditions.
- D - this short-term debt obligation was declared in default.
National Scale Ratings
Along with the international credit rating scale, Standard & Poor's also supports a number of national scales, including the Russian one. National scales are designed to meet the needs of participants in national financial markets. The Issuer Rating and National Scale Debt Rating reflect an assessment of the relative reliability of issuers and debt instruments listed on the national market. The national scale provides more opportunities for distinguishing the creditworthiness of issuers, as it excludes some sovereign risks, in particular the risk of transferring funds outside the state and other systematic risks equally characteristic of all issuers in this market.
Since ratings on the national scale reflect national specifics, it makes no sense to compare ratings on different national scales. In the same way, the ratings on the national scale and on the international scale are not comparable.
Forecasts
- Positive outlook - possible rating upgrade.
- Negative outlook - possible downgrade.
- Stable outlook - the rating is likely to remain unchanged.
- Developing forecast - both an increase and a downgrade of the rating are possible.
BICRA
The BICRA indicator (banking industry country risk assessment) reflects strong and weak sides the banking system of a particular country in comparison with the banking systems of other countries. Using the BICRA grading, banking systems are divided into 10 groups in terms of their exposure to country risks, with the strongest countries in group 1 and the weakest in group 10.
For example: group 9 includes the following countries - Kazakhstan, Belarus, Azerbaijan, Georgia.
History of the credit rating of the Russian Federation
| the date | Rating according to the international scale | Rating by national scale | |||||
|---|---|---|---|---|---|---|---|
| in foreign currency | In national currency | ||||||
| Long term | Forecast | short term | Long term | Forecast | short term | ||
| 21.12.09 | BBB | Stable | A-3 | VVV+ | Stable | A-2 | ruAAA |
| 08.12.08 | BBB | Negative | A-3 | VVV+ | Negative | A-2 | ruAAA |
| 04.09.06 | BBB+ | Stable | A-2 | BUT- | Stable | A-2 | ruAAA |
| 15.12.05 | BBB | Stable | A-2 | BBB+ | Stable | A-2 | ruAAA |
| 19.07.05 | BBB- | Stable | A-3 | BBB | Stable | A-3 | ruAAA |
| 31.01.05 | BBB- | Stable | A-3 | BBB | Stable | A-3 | ruAAA |
| 12.07.04 | BB+ | Stable | B | BBB- | Stable | A-3 | ruAA+ |
| 27.01.04 | BB+ | Stable | B | BBB- | Stable | A-3 | ruAA+ |
| 03.11.03 | BB | Stable | B | BB+ | Stable | B | ruAA+ |
| 05.12.02 | BB | Stable | B | BB+ | Stable | B | ruAA+ |
| 26.07.02 | bb- | Stable | B | bb- | Stable | B | ruAA+ |
| 22.02.02 | B+ | Positive | B | B+ | Positive | B | ruAA+ |
| 19.12.01 | B+ | Stable | B | B+ | Stable | B | - |
| 04.10.01 | B | Positive | B | B | Positive | B | - |
| 28.06.01 | B | Stable | B | B | Stable | B | - |
| 08.12.00 | B- | Stable | C | B- | Stable | C | - |
| 27.07.00 | SD | - | - | B- | Stable | C | - |
Standard & Poor's*
AA The probability that the issuer will pay off debts is very high
BUT The issuer's obligations are more subject to changes in the economic and financial situation than the debts of the issuer with a higher rating. The probability of repayment of obligations is high
VVV Liabilities have relatively high risk protection parameters. However, economic or financial problems are likely to weaken the issuer's creditworthiness and reduce the likelihood of debt repayment
BB Bonds are less subject to default than other, more speculative issues. They are sensitive to major business and economic risks. The risk that the issuer will not fulfill its obligations is low
AT Liabilities are more at risk of default than BB debts. At the moment, the issuer is able to pay off its debts. However, negative financial and economic conditions are likely to reduce the issuer's creditworthiness
CCC Liabilities at this time may be subject to non-payment and depend on financial and economic conditions. In the event of financial or economic problems the issuer is likely to be unable to repay debts
SS Current responsibility highly susceptible to non-payment
FROM There is a high probability of non-payment on subordinated debt or obligations on preferred shares. Such a rating is assigned if the issuer's bankruptcy proceedings have been initiated, but the company has not yet stopped paying its debts
D Issuer default
* Each rating level is assigned a plus sign (+) or minus sign (-) ** Obligations of these levels have significant speculative characteristics. ВВ - debt securities rating of the least speculative degree, C - highest
According to Standard & Poor's
Ahh Top quality investment. Minimal Risk default
Ah High quality commitments with very low credit risk
BUT Obligations of above average quality, subject to low credit risk
Waa Medium credit risk commitments. Considered relatively speculative
Wa Liabilities have speculative characteristics and are subject to significant credit risk
AT Speculative liabilities with high credit risk
Saa Volatile liabilities subject to very high credit risk
Sa Highly speculative liabilities prone to default
FROM Obligations of the lowest class. The issuer is most likely in default. The probability of debt repayment is minimal
* Each rating level from Aa to Saa can be assigned a serial number 1,2,3. Number 1 means the highest quality of liabilities within the given rating level; 2 - average quality within the given rating level; 3 - the lowest quality within this rating level
According to Moody's
AAA Top quality investment. Minimal risk of issuer default. Force majeure circumstances of the issuer do not affect the repayment of obligations
AA Very high quality investment, very low credit risk. High probability of repayment of financial obligations. Creditworthiness is not significantly affected by economic and financial changes
BUT High level of investment quality. Low credit risk. The probability of repayment of obligations is quite high. However, obligations with such a rating are more subject to economic and financial changes than ratings of higher levels.
VVV Good level investment quality. At the moment, the probability of default is extremely low. The probability of repayment of obligations is very high, however, changes in the economic and financial conditions of the issuer, most likely, will shake the issuer's creditworthiness. The lowest level of investment grade liabilities
BB Speculative investment. The probability of an issuer's default increases significantly with changes in the economic situation. However, the company has alternative sources of funding, so the obligations are likely to be repaid.
AT High level of speculation. High risk of default. Financial obligations are currently being repaid, but the company's margin of safety is limited
CCC Possible default. The ability to repay obligations is highly dependent on the favorable development and economic conditions of the issuer
SS Possible default
FROM High probability of default
RD The issuer is unable to repay part of the obligations
D Issuer default
Short answer: remember a few simple rules and pay attention not only to the letters, but also to the explanations of analysts.
long answer.
In the press, there are often messages like “Fitch rating agency has downgraded the rating of such and such a bank to BBB-, the outlook is stable.” And it is not clear what this means: either it is already running to the bank to withdraw money, or it is already too late, or it is still normal and the rating remains high. At the same time, there are several such agencies, and each of them has its own rating scale with its own letters, numbers and even signs. How to figure it out?
First, what is a "rating". The main thing to understand is that the rating from the agency is the opinion of several analysts, based on an assessment of the bank's statements and additional information. This opinion may be erroneous, biased, not very accurate, or simply outdated. Those who follow the events in the financial world remember that the world rating agencies "missed" the 2008 crisis, when the most reliable banks in terms of ratings were on the verge or on the verge of collapse. That case undermined the public’s confidence in the ratings, but it’s still not worth discarding them completely, a certain useful information they carry. Nevertheless, I emphasize again: the rating is the opinion (possibly erroneous) of living people, based mostly on official (possibly distorted) information, and not some absolute strictly mathematical truth.
Russian banks are rated by three international agencies S&P, Fitch and Moody's and several Russian ones - Rus-rating, Expert-RA, NRA and AK&M. It is not necessary that each agency evaluates each bank: usually a bank has 2-3 ratings in total, 1-2 of them from international agencies and 1-2 from Russian ones. International agencies have two scales - international and national. Separately assigned long-term and short-term ratings and ratings of liabilities in foreign currency and domestic. In general, in fact, there are a lot of ratings and each of them shows something different. In addition, in addition to the rating, the agency gives a forecast for its change: negative (the rating may be lowered at the next recalculation), stable (the rating is likely to remain unchanged) and positive (the rating may be raised). Usually, when they talk about the "bank rating" without clarification, they mean long-term international ranking, but if you wish, you can see other ratings.
The international rating of a bank cannot be higher than the international rating of the country, therefore, no matter how strong and problem-free a bank is, its rating may be far from the highest ratings - simply because there are country risks common to all local banks. Accordingly, when the country's rating is downgraded, the international ratings of banks are also revised - upwards or downwards. Therefore, do not be intimidated by the rather low BBB- rating given to the most reliable Russian banks S&P agency, because Russia has exactly the same rating. Accordingly, according to the national scale, such banks have a ruAAA rating that cannot be higher.
The earlier the letter in the alphabet, the better (A - excellent, B - good, C - bad, D - very bad);
- the more letters in the rating, the better if we are talking about the same letters (BBB is better than BB, but A is better than BBB);
- the smaller the number (if any), the better (Baa1 is better than Baa3);
- "+" is better than nothing, and nothing is better than "-".
In general, all ratings that start with A can be considered very good. Three-letter ratings starting with B (BBB with plus and minus signs or Baa with numbers) are decent. The rest of the ratings, starting with B, are speculative, that is, they are acceptable, but require special attention to this bank. The ratings at C are frankly weak, the ratings at D mean that the bank is unable to pay its debts. Once again, I would like to note that it is worth making an adjustment for whether this rating is international or national: given the relatively low "international" level of reliability of Bank B from Fitch, its Russian rating will be very decent - BBB.
An important element of the rating is the forecast of its further changes. A negative outlook does not mean that the rating will definitely be downgraded at the next recalculation, but the likelihood of such a change is high. This is not very good, but we need to look at what level the decline will start from. If now the bank has an international rating of BBB-, then let it go down one notch - it's not scary. And if it's already just B, then a further decrease is very unpleasant.
Another parameter that you should definitely pay attention to is the date of the rating. The situation in the financial world is changing rapidly, so a year-old rating can hardly be considered informative.
PS If you have questions about personal finance, investments and banking, ask in the comments. I will try to answer them as detailed and clear as possible.
