S&P: Cyprus-Based FG BCS Rated 'B-/C'; Outlook Stable; BCS Holding International 'B-/C' Ratings Withdrawn At Group's Request
At the same time, we affirmed and consequently withdrew our 'B-/C' long - and short-term counterparty credit ratings on BCS Holding International Ltd. at the company's request. At the time of the withdrawal, the outlook was stable.
FG BCS is the new top-level nonoperating holding company of BCS Group, a large independent Russian financial services group with key operating subsidiaries in Russia, Cyprus, and the U. K.
Our ratings on FG BCS reflect our opinion of BCS Group as one of the largest and most diversified brokers in the Russian market, with a 25% share of the equity market's turnover and 12% of the retail clientele across Russia. We also take into account the group's noticeable international presence and its gradual emergence as a key execution platform for global players in Russia-related markets.
We consider the group's capitalization to be adequate, given what we view as reasonable leverage and a risk-adjusted capital (RAC) ratio of about 10.8% as of year-end 2015, which we expect will be sustained over the next 12-18 months. The group's earnings are also adequate in our view, supported by a pick-up of the stable portion of revenues in 2015. Risk management procedures are robust, but commensurate with the complexity of the group's operations and activities. The group maintains a considerable liquidity cushion, with adequate liquidity coverage metrics: The ratio of broad liquid assets plus available committed unsecured lines to short-term wholesale funding was about 200% as of year-end 2015. However, it frequently resorts to short-term wholesale funding for operating activities, causing volatility in funding ratios.
Our long-term rating on FG BCS is one notch lower than our assessment of the group credit profile to reflect the structural subordination of the nonoperating holding company's liabilities to those of the operating companies.
The stable outlook on FG BCS reflects our opinion that BCS Group will be able to withstand potential deterioration of operating conditions in Russia in the next 12-18 months while maintaining sufficient capitalization and liquidity.
We may take a negative rating action if we see that the group's capitalization is insufficient to absorb potential losses, with the RAC ratio declining to less than 7%. This could result from an increased risk appetite or higher risks in Russia or other countries. A disruption of market confidence in the group or the creation of barriers to liquidity transfer among group members may also result in a negative rating action.
A positive rating action is likely to be contingent on an improvement of operating conditions in Russia, including a more robust and credible regulatory regime. However, should we see further consistent strengthening of profitability, supported by strong capitalization with a RAC ratio above 10%, we may also take a positive rating action.