Moody's Upgrades Converse Bank's Ratings Citing Strong Fundamentals

Strategic Insights -

Moody's Investors Service has upgraded Converse Bank's ratings, citing sustained improvements in asset quality, stable capital adequacy, and strong profitability over the past two years. The upgrade reflects the bank's ability to considerably decrease its problem loans, improve provisioning coverage, and maintain a robust liquidity cushion.

Key Takeaways:

  • Converse Bank's long-term local and foreign currency bank deposit ratings were upgraded to Ba3 from B1, reflecting the bank's ba3 Baseline Credit Assessment (BCA) and Adjusted BCA.
  • The bank's problem loan ratio declined to 3.1% as of year-end 2024 from 5.1% at the end of 2022, with improvement in provisioning coverage to 69% from 51%.
  • Capital adequacy remains a key credit strength, with a Tangible Common Equity (TCE)/Risk-Weighted Assets (RWA) ratio of 14.6% as of year-end 2024.
  • Converse Bank reported a still strong net income of AMD15.9 billion in 2024, translating to a return on tangible assets of 2.8%.
  • The bank remains predominantly deposit funded, while the share of market funding accounted for an increased 21% of tangible assets as of year-end 2024.
  • Converse Bank's Ba3 long-term foreign and local currency deposit ratings are based on its ba3 BCA and our assessment of a moderate probability of government support for the bank in the event of need.

Statistics:

  • Problem loan ratio: 3.1% (year-end 2024) vs. 5.1% (year-end 2022)
  • Provisioning coverage: 69% (year-end 2024) vs. 51% (year-end 2022)
  • Tangible Common Equity (TCE)/Risk-Weighted Assets (RWA) ratio: 14.6% (year-end 2024)
  • Net income: AMD15.9 billion (2024)
  • Return on tangible assets: 2.8% (2024)
  • Share of market funding: 21% of tangible assets (year-end 2024)

Sources:

  • Moody's Ratings, "Moody's upgrades Converse Bank's ratings due to sustained improvements in asset quality and stable capital adequacy" (no date provided in source)
  • Moody's Investors Service, Banks, published in November 2024, available at https://ratings.moodys.com/rmc-documents/432741.