AK&M Rating Agency assigned the ‘B++’ credit rating (stable outlook) as per the national scale to Bank Kuznetsky LLC. The ‘B++’ rating indicates that Bank Kuznetsky LLC is qualified as a sufficiently reliable borrower. Risk of a delay in meeting liabilities is moderate, restructuring risk for a loan / part of a loan is insignificant.
The rating score is essentially supported by the high quality of equity capital. As of January 1, 2011, equity capital of Bank Kuznetsky LLC was RUB 220.4 million (growing by 9.84% year-on-year against 2.4% on average in Russia’s banking system). The share of Tier 1 capital is 78.9%, which is a good level for the Russian banking system. A subordinated loan of RUB 46.4 million accounts for 100% of the Bank’s supplementary capital indicating its good quality. Equity capital of Bank Kuznetsky LLC for the last four years increased by 30%.
Another essential argument for the rating score of Bank Kuznetsky LLC is the high liquidity level of the Bank’s assets.
As of the last reporting dates, the share of liquid funds in the asset structure was fairly high, which is represented by the standard liquidity ratios. As of January 1, 2011, Instant liquidity ratio (N2) was 70.3%, the minimum value required being 15%. Current liquidity ratio (N3) equaled 76.9% against the minimum acceptable percentage of 50%, long-term liquidity ratio (N4) was 50.6%.
The growing funding sources send another positive signal for the Bank’s rating score. While the Bank’s liabilities totaled RUB 1,277 million as of January 1, 2010, they grew by RUB 650 million as of April 1, 2011 reaching RUB 1,926.2 million. This growth was driven by the increasing amount of funds placed by non-credit institutions and physical persons.
The rating score is essentially restricted by the operating unprofitability of the Bank in 2010. In 2010, loss of Bank Kuznetsky LLC was RUB 51.1 million. Pre-tax profit of the Bank was below zero in 2010, with a loss of RUB 47.3 million down to supplementing provisions against possible loan losses.
At the same time, net profit and pre-tax profit for Q1 2011 were high: net profit was RUB 30.2 million, pre-tax profit totaled RUB 31.6 million.
In 2010, all profitability indicators of Bank Kuznetsky LLC decreased considerably.
Return on equity (ROE) of Bank Kuznetsky LLC for 2010 was below zero (against 12.5% on average in Russia’s banking system in 2010). As of April 1, 2011, ROE was 49.9%.
Return on assets (ROA) of Bank Kuznetsky LLC decreased for several years reaching 0.6% in 2009 and falling to minus 2.6% in 2010 (against the average ROA of 1.9% in the banking sector). As of April 1, 2011, ROA of Bank Kuznetsky LLC was 6%.
In 2010, net income on loans to net loan receivables ratio decreased by 1.25 percentage point to 6.4%. As of April 1, 2011, this indicator reached 6.8%. Net income on loans to assets ratio decreased by 1.32 percentage points to 4.7% yet improved to 5% as of April 1, 2011.
In 2010, net income on loans to equity capital ratio grew by 0.3% percentage points to 40.4% and reached 46.3% as of April 1, 2011.
Our profitability analysis of Bank Kuznetsky LLC shows that the Bank’s financial efficiency in 2010 was not high.
Another negative signal comes from the low capital adequacy ratio (N1).
Over the last three years, CAR was below the average CAR value in Russia’s banking system. As of January 1, it was 11.7% against 18.1% on average in Russia’s banking system as of the same date. Today, it is approaching the lower threshold (10%), which naturally exerts pressure on the rating score.
Bank Kuznetsky LLC has been active in the market of banking services since 1990 being a mid-sized Russian regional bank in the amount and volume of operations, with a good pace of development. The bank is registered in Penza, its PoS network consists of 12 additional outlets and 5 stand-alone cash desks.
In early 2011, the Bank ranked 509th in the amount of assets in Russia (574th in 2009). As of January 1, 2011, the bank’s assets totaled RUB 2.12 billion, equity capital was RUB 220.4 million.
Bank Kuznetsky LLC possesses banking license no. 609 granted to it by the Central Bank of the Russian Federation on September 30, 2004.
In January 2005, Bank Kuznetsky LLC was included in the register of Banks participating in the deposit insurance scheme, certificate of registration for the participation in the DIS scheme no. 428 as of 1/14/2005).
The Bank’s of is Audit-Service LLC (location: ul. Lermontova 8, office 3, 440026 Penza).

This press release is based on the statement of assigning a credit rating to Bank Kuznetsky LLC.
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.


<span class="yaspeller_error" data-spell-word="AK">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

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