Page 103 - RusRPTOct20

surge in bad loans. The military and industrial complex makes up a large share of PSB's loans, and these borrowers could have experienced ruptures to their international supply chains. However, previously S&P has confirmed the rating of PSB at BB-/B with Positive outlook, noting that the state-affiliated bank can count on support despite the worsening operational environment. Domestic rating agency Ekspert RA rates PSB at ruAA- and ruAA due to its state affiliation.
Fitch Ratings has revised Russian-based JSC Alfa-Bank's (Alfa) Outlook to Stable from Negative ​while affirming the bank's Long-Term Issuer Default Rating (IDR) at 'BB+'. Fitch has also affirmed the Long-Term IDR of Alfa's holding company, ABH Financial Limited (ABHFL), at 'BB'. A full list of rating actions is provided below. The Outlook revision reflects reduced pressure on Alfa's credit profile from the pandemic, lower oil prices and the resulting economic contraction in Russia. Pre-impairment profitability has remained robust, which supports the bank's loss absorption capacity and, in Fitch's view, would be sufficient to provide for further credit losses even in the event of a longer and more severe downturn than currently anticipated. Asset-quality erosion has also been limited to date. Alfa's ratings could be upgraded to 'BBB-' if the Russian economy stabilises in line with Fitch's base case, and credit losses from the downturn and from expansion into retail lending remain manageable. A more severe economic contraction than anticipated by Fitch or larger-than-expected credit losses could result in the ratings remaining at their current level, rather than negative rating action, given the bank's loss absorption capacity and strong record in managing problematic assets. The IDRs of Alfa are driven by its intrinsic credit strength, as expressed by its Viability Rating (VR), and continue to capture its strong franchise, a record of strong performance and resilient asset quality to date, and reasonable liquidity and capital buffers.
8.2 ​Central Bank policy rate
The board of the Central Bank of Russia (CBR) has resolved to maintain
the key interest rate flat at 4.25% ​in its policy meeting of September 18. The
economy is doing well, but the bank struck a conservative note due to rising
geopolitical risks.
As reported by ​bne IntelliNews,​ since March the CBR has started a monetary
stimulus cycle and cut the key rate three times from 6% by a total of 1.75pp. At
the last meeting, the CBR made a ​cautious interest rate cut of 25bp in July​, as
inflation trended safely below the target 4%.
The decision to maintain the key rate flat was ​largely expected by the market​.
Domestic analysts previously surveyed by RBC business portal noted ruble
weakness, a spike in geopolitical risks and slightly higher inflation in August as
103 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com