The ‘B++' rating indicates that JSCB Zarechye (OAO) is qualified as a sufficiently reliable borrower (the highest sub-grade of the ‘B' grade).
The key performance indicators of JSCB Zarechye (OAO) are steadily growing. In 2010, the Bank’s assets increased by 50% (against the banking average of 14.9%). As of 7/1/2011, the Bank’s assets were estimated at RUB 3.6 billion increasing by 54.34% against 7/1/2010.
There is an upward trend in the amount of the loan portfolio. In 2010, the Bank’s loan assets increased by 25% to RUB 2,673.4 million As of July 1, 2011, amount of the loan portfolio was RUB 2,200.7 million 53.1% above the value on July 1, 2010.
In 2010, the Bank’s liabilities increased considerably (+49.6%). As of July 1, 2011, they reached RUB 2,462.6 million increasing by 56.7% year-on-year.
In 2010, the Bank’s own funds increased by 54.1% against an average value of 2.4% in the banking sector of the Russian Federation. This increase resulted from the growing Tier 1 capital of the Bank as its authorized capital increased twice.
In 2008-2011, the share of Tier 1 capital was 83-93% proving the high quality of the Bank’s capital. Also, authorized capital, a highly reliable source, accounts for most of the Tier 1 capital. Authorized capital constituting the Tier 1 capital (excluding preferred shares in the amount of RUB 3.6 million) is RUB 996.4 million (93% of the Bank’s equity capital), which is far above the average level in Russia’s banking system (25%).
One of the arguments for the rating score is the increasing profit. Balance sheet profit of the Bank has been growing since it last fell in 2008. In 2010, profit was RUB 96.4 million exceeding the 2009 result (RUB 84.1 million) by 14.6%. Net profit has also been on the upward trend since 2008. In particular, it increased by 2.3% to RUB 62.2 million in 2010.
Our profitability analysis of JSCB Zarechye (OAO) reveals that the Bank has achieved good efficiency of financial operations in recent years. Return on assets (ROA) of JSCB Zarechye (OAO) over the period under review matches or surpasses the average level in Russia’s banking sector. In 2010, ROA of the Bank was 2.4% against Russia’s banking average of 1.9%. In 2010, return on equity (ROE) was 10.5% (against 12.5% in Russia’s banking system). In 2010, this ratio looked down, which is due to the growth of the Bank’s equity capital outstripping the profit growth.
Over the whole period under review, net interest income prevailed in the net income structure (more than 50%), which speaks well for the Bank’s income profile.
The loan assets of JSCB Zarechye (OAO) are of fairly good quality. The share of NPLs and problem loans in the loan portfolio as of July 1, 2011 was 0.01%, far below the average value in Russia’s banking system (about 8%). This proves that the Bank’s credit policy is well-balanced and the credit risk is low. Besides, class 1 loans and class 2 loans together account for over 95% of the loan portfolio, also indicating its good quality.
As of July 1, 2011, arrears on the loans granted by JSCB Zarechye (OAO) and other funds placed by it amounted to 0.01% of the loan portfolio, also comfortably below the average value in Russia’s banking sector as of the same date (4.5%).
As a whole, the asset structure of JSCB Zarechye (OAO) is efficient in terms of currency. Short-term assets prevail in the current asset structure (assets of up to 90 days account for 50.6% of the current assets), which increases the bank's stability while slightly reducing its margin.
Contributions of physical persons are steadily increasing. In 2010, they grew by 19.6%. At the end of the second quarter 2011, contributions of physical persons reached RUB 459.8 million increasing by 29.8% year-on-year.
One of the things restricting the rating score is the relatively high concentration of liabilities within one certain group of depositors. The maximum share of that group in the total amount of funds as of July 1, 2011 was over 67% of all liabilities (RUB 1,666 million), 2 largest groups account for over 70%, 5 largest depositors (groups of depositors) for 75% of all the obligations. Our retrospective analysis revealed that the share of the largest customer (Kazan Helicopter Plant) in the Bank’s obligations has been high over the whole period under review. While it proves the Bank’s efficiency and capability to ensure stable operation under such circumstances, it also constitutes a risk of falling victim to this customer’s negative financial and economic performance.
The N9.1 indicator (Maximum amount of loans, guarantees and surety bonds to the bank’s member) is considerably higher than the average value in Russia, yet below the maximum threshold set by the Central Bank of the Russian Federation (50%).
We do not observe a considerable expansion of the Bank’s customer pool. Its dependence on the existing customers may later bring about serious risks banks are consolidated and competition becomes tougher.
JSCB Zarechye (OAO) has been active in the banking market since 1990. The bank is one of the 500 largest banks of Russia. As of July 1, 2011, the Bank’s assets amounted to RUB 3.6 billion, equity capital was estimated at RUB 1,066 million. JSCB Zarechye (OAO) possesses general banking license no. 817 granted by the Central Bank of the Russian Federation on November 15, 2002. In 2004, the Banking Supervision Committee of the Central Bank permitted JSCB Zarechye (OAO) to join the Deposit Insurance System (DIS). The Bank’s auditor is Presto Audit LLC.
JSCB Zarechye (OAO) provides the whole range of banking services to legal entities and physical persons.

This press release is based on the statement of assigning a credit rating to JSCB Zarechye (OAO).
The rating score, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's reliability and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities to the Bank.
AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993.
AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).
AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Provision 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide business banking services to project and engineering entities implementing investment projects), the MICEX (as a prerequisite for including bonds in the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation base, for listing bonds and for providing access to the MICEX+ trading mode). Pursuant to an order of Russia's Government AK&M Ratings count for approving the capitalization increase procedure for banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.

CJSC Analysis, Consulting and Marketing Rating Agency
ul. Gubkina 3
Moscow, Russia
www.akmrating.ru
Press release by: Y.B. Kuznetsova
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18