
Ratings On Gazprombank And Its Core Subsidiaries Affirmed At 'BB+/B'; Outlook Stable
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- We believe that Gazprombank will manage the effects of the still 
 challenging economic conditions over our outlook horizon.
- We are affirming our ratings on Gazprombank and its core subsidiaries, 
 Gazprombank (Switzerland) Ltd. and Bank GPB International S.A., at
 'BB+/B'.
- The stable outlook on Gazprombank reflects our view that the bank's 
 financial profile, and especially its loss-absorption capacity and asset
 quality, will likely remain broadly stable in the next 12-18 months.
- The stable outlook on Gazprombank (Switzerland) and Bank GPB 
 International mirrors that on Gazprombank and is likely to move in tandem
 with the outlook on the parent.
MOSCOW (S&P Global Ratings) July 6, 2018--S&P Global Ratings said today that 
it affirmed its long- and short-term issuer credit ratings on Russia-based 
Gazprombank JSC and its core subsidiaries, Gazprombank (Switzerland) Ltd. and 
Luxembourg-based Bank GPB International S.A., at 'BB+/B'. The outlook on all 
three entities is stable.
The affirmation is based on our belief that Gazprombank will be able to manage 
the effects of the still challenging economic conditions over our outlook 
horizon. The bank's profitability has recovered in the past couple of years 
following the significant drop in cost of risk, which supports its internal 
capital generation. However, we expect a slight decline in its interest 
margin, in line with the sector trend and because of increased competition, 
after it reached about 3% in 2017 underpinned by a reduction in funding costs. 
Gazprombank's credit costs stood at 0.7% for 2017 and the bank posted only a 
minimal annualized recovery for the first quarter of 2018. In the first 
quarter, the bank reported a Russian ruble (RUB) 24 billion (or about 0.6% of 
the bank's gross loan book) of International Financial Reporting Standard 
(IFRS) 9 impact. Thanks to Gazprombank's moderate appetite for growth in the 
coming years, and good provisioning coverage, we anticipate credit costs to 
stabilize at around 0.5% of its average gross loan book.  
We assess Gazprombank's capitalization as a weakness for the rating, as 
demonstrated by our risk-adjusted capital (RAC) ratio of about 4.0% at 
year-end 2017. We expect RAC to hover at around 3.6%-4.0% in the next 12-18 
months. 
Gazprombank's nonperforming loans (more than 90 days overdue) stabilized at 
2.4% of gross loans as of March 31, 2018, with a 2.1x provision coverage ratio 
(including IFRS9 provision). This is better than we expected for the overall 
Russian banking sector and largely reflects the bank's focus on Tier 1 large 
Russian companies.
We recognize that the Russian government and the bank's direct shareholders 
have demonstrated strong support toward Gazprombank. We expect the government 
will directly or indirectly support capital-building at Gazprombank to ensure 
that it has adequate competitive footing in the market.