Moody’s publishes a positive credit opinion on Russia's International Investment Bank

Moody’s publishes a positive credit opinion on Russia's International Investment Bank
IIB gets a thumbs up from Moody's
By bne IntelliNews November 10, 2017

Moody’s published a positive credit opinion on International Investment Bank (IIB) with the bank - formerly billed as the Soviet era's answer to Europe's EBRD - continuing to reinvent itself.

The international rating agency Moody’s Investors Services improved its credit opinion of IIB after meetings with the bank's management in October.

Set up in Soviet times to foster cooperation and trans-border investment amongst the Comecon countries, the bank has been remaking itself over the last three years as a modern International Financial Institution (IFI) and the transition program officially came to an end at the close of 2015.

Moody’s noted a number of positive developments in its credit opinion that have had a positive impact on the institutional development and the operational activities of the IIB this year.

In May, 2017, Moody’s upgraded IIB’s rating outlook to positive from stable and affirmed IIB’s Baa1 issuer and debt ratings. In addition to the Moody's Baa1 rating (outlook “positive”), IIB has been assigned ratings of BBB with a stable outlook from S&P and Fitch, as well as an A rating from the Chinese rating agency Dagong (outlook stable).

“The Moody's opinion confirms the financial stability and the operational efficiency of the Bank. I would like to express my gratitude to the Agency for its positive evaluation of our efforts aimed at enhancing the role of the IIB as an effective multilateral financial institution, which operates in the interests of sustainable development of the economies of its shareholders,”, chairman of the IIB board Kosov said in a statement.

And the agency was pleasantly surprised by the "policy continuity" in the unanimous approval by the member states of the new development strategy that will start next year and run until 2022 as well as the board’s decision to re-elect the IIB’s chairman Nikolay Kosov for another five-year term.

The bank has been active in the last few years investing in the development of the economies of its member states and active development of local capital markets, including the issue of some pioneering local-currency bonds on local exchanges, its bank lending support programme with local partners and more recently its trade financing programme.

In the next strategic cycle IIB expects to deliver a two-fold asset growth and loan portfolio over five years, as well as delivering on more qualitative customer relations improvements, development of flexible products and service offerings in each of its member states.

The bank has also made progress in its risk management and liquidity management framework, according to Moody's. This year IIB created an “Early Warning Mechanism” and extended the period for its liquidity buffer to 12 months from six months, which is intended to strengthen its stability during the stress tests.

But the proof of the pudding was the consistent assets growth, quality of the treasury portfolio, and funding diversification. IIB’s development assets, mostly loans, increased by around 38% y/y to circa €501mn in the first half of this year from €363mn in the same period a year earlier. The bank has also increased the Aaa-to-A3-rated assets in its portfolio - about 41% of the total volume as of June 30. At the same time, the IIB has expanded its funding to 11 countries as of the first half of 2017.