CJSC AK&M Rating Agency affirmed the national scale credit rating of Kuznetsky Bank Open JSC (license no. 609) at B++, tier 3. The outlook is stable.

The 'B++' rating (tier 3) indicates that Kuznetsky Bank Open JSC qualifies as a sufficiently creditworthy borrower. Risk of a delay in meeting obligations is moderate, full or partial debt restructuring risk is insignificant.

We regard the qualitative improvements in the Bank's balance sheet and operating performance in 2013 as a key positive rating driver.

As a result of an increase of the authorized capital, current year's retained earnings, a subordinated loan and an additional share issue, the equity capital of Kuznetsky Bank Open JSC grew by 10.9% (from RUB 466,445 thousand on January 1, 2013 to RUB 517,457 thousand on June 1, 2014). This stronger result raised the Bank's equity capital adequacy ratio as of the start of this year and brought about improvements to other performance indicators. Therefore, the Bank's funding base increased by 11.5% in 2013 and the first quarter of 2014 (from RUB 3,107,200 thousand to RUB 3,464,315 thousand), assets grew by 11% (from RUB 3,521,350 thousand to RUB 3,909,230 thousand). Over the period from April 1, 2013 to April 1, 2014, Kuznetsky Bank Open JSC expanded its customer base by 15.8%, the number of loans provided by the Bank increased by 15.9% for the same period.

In 2013, the Bank's operations were profitable. Pre-tax profit was RUB 70,836 exceeding the 2012 level by 47%.

We also appreciate the well-balanced liquid assets and liabilities in terms of maturity as a positive rating driver. More than 60% of the Bank's obligations mature in more than 1 year.

In 2013 and the first quarter of 2014, the funds raised by the Bank cost it less than the Bank of Russia's refinancing rate, which contributes to its rating. At the end of March 2014, the cost of debt was 6.66% p.a., the interest rate on customer deposits 6.84% p.a.

Over the period under review, the Bank's liquidity and credit risk ratios stayed within established limits meeting the applicable requirements of the Central Bank of Russia.

At the same time, the negative profit performance in the first quarter of 2014, the weaker return ratios, the underwhelming equity capital adequacy, and the volatile acid test ratio are working against the credit rating of Kuznetsky Bank Open JSC.

In the first quarter of 2014, the Bank operated below the break-even point. Loss after tax reached RUB 17,099 thousand, whereas its profit after tax for the first quarter of 2013 was RUB 5,108 thousand. The negative profit in January-March 2014 reduced the relative profitability. Over the period from April 1, 2013 to April 1, 2014, the Bank's return on equity and assets ratios were below the average level in Russia's banking sector (9.35% and 1.19%, respectively, against 15.10% and 1.90% on average for banks).

As a whole, the Bank's equity capital adequacy ratio was below the average level in Russia's banking sector. On most of the monthly reporting dates in 2013 and in early 2014, it ranged from 11.3% to 13.5% against the 12.9-13.5% range in Russia's banking sector.

Another risk factor for the Bank is the volatility of its acid test ratio which fluctuated violently in 2013 and the first quarter of 2014 (from 29.02% on April 1, 2013 to 78.59% on January 1, 2014). As of April 1, 2014 this ratio was 53.93%.

Full Bank name: Kuznetsky Bank Open Joint-Stock Company

Short name: Kuznetsky Bank Open JSC

Kuznetsky Bank Open Joint-Stock Company (CBR license no. 609) has been operating in the market of banking services since 1990. The Bank is licensed to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of October 4, 2012 and a license to accept ruble-denominated money deposits from individuals as of January 19, 2012. The Bank is a member of the deposit insurance scheme, reg. no. 428 as of January 14, 2005.

Kuznetsky Bank Open JSC located in Penza has a branch network in Penza, Penza region, and Cheboksary. The Bank provides all kinds of banking services involving Russian rubles, a limited range of services involving foreign currencies, lends to legal entities and individuals.

This press release is based on the Statement of assignment of a credit rating to Kuznetsky Bank Open JSC.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Bank's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds to the Bank.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

CJSC Analysis, Consulting and Marketing Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.

CJSC AK&M Rating Agency

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www.akmrating.ru

Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.