To Say Goodbye to Russia, There Is Still an AAA

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A Russian rating agency is avoiding the issue of banks withdrawing from Russia.

The Russian Analytical Credit Rating Agency ACRA affirms the AAA(RU) credit rating to SEB BANK JSC with a stable outlook: “The credit rating of SEB Bank JSC is based on the very high likelihood of extraordinary support from the parent company. SEB Bank’s standalone creditworthiness assessment (SCA) stems from its strong capital position, adequate risk profile and liquidity and funding assessments, and its adequate business profile.”

ACRA recognizes SEB Bank as one of the hundred largest Russian banks: “The Bank is wholly owned by its parent bank, which is the parent company of one of the largest financial groups in Europe (hereinafter, the Group, the Supporting Entity, or the SE). The Bank offers comprehensive services and lending to Russian subsidiaries of clients of the Group, whose parent companies are located in Sweden, Finland, Norway, Germany and other Western European countries. The Bank also operates in the interbank and foreign exchange markets.”

SEB continuously focuses on improving the Group’s rating, since a high rating over time implies lower funding costs and more business opportunities in the international capital markets. “SEB is rated by Fitch, Moody’s and S&P Global. Moody’s also rates SEB’s covered bonds”, writes SEB on its website. The following table shows the current rating of SEB as shown on https://sebgroup.com/investor-relations/debt-investors/credit-ratings:

 Fitch RatingsMoody’s Investors ServiceS&P Global
Stand-alone ratingaa- (viability rating)a3 (baseline credit assessment)A
Issuer credit rating
AA-Aa3A+
OutlookStableStableStable
AT1 instrumentsBBB+Baa3 (hyb) 
T2 subordinated debtABaa1BBB+
Senior non-preferred debtAA-A3 (junior senior)A- (senior subord)
Senior unsecured debtAAAa3A+
DepositsAA/F1+Aa3A-1
Counterparty ratingAA(dcr)Aa2/Prime-1AA-
Counterparty risk assessment Aa2(cr)-Prime-1(cr) 

There are other credit rating agencies providing credit ratings for SEB, which are currently ignored in this table provided by SEB, such as Scope Ratings. Scope rates SEB on a subscription basis. Likewise, the credit ratings of the Russian rating agency ACRA, which concern the subsidiary in Russia, are not reported.

SEB in Russia

“We provide our home market corporate banking and financial institution clients with a wide range of services from our offices in Moscow and St. Petersburg” writes SEB on its group website (https://sebgroup.com/about-us/our-business/our-locations/seb-in-russia). But: “Under the current conditions it is not viable for SEB to maintain operations in Russia, and SEB has therefore started scaling these down. This will be done in a responsible and orderly manner and in accordance with regulatory and legal obligations.”

Key assumptions in ACRA’s reasoning for a AAA credit rating are:

  • The current ownership structure and operational control by the Supporting Entity remaining unchanged;
  • The Bank maintaining the current business model, and its operational performance and loan portfolio quality remaining unchanged.

At best, the ACRA report makes this subtle reference to the bank’s intention to discontinue its business in Russia:

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