CJSC AK&M Rating Agency affirmed the national scale credit rating of Commercial Bank Investment Union Ltd (license no. 637) at 'B++', tier 2. The outlook is stable.

The 'B++' rating indicates that Commercial Bank Investment Union Ltd qualifies as a sufficiently creditworthy borrower. Risk of a delay in meeting obligations is moderate, full or partial debt restructuring risk is insignificant.

The key positive rating drivers for Commercial Bank Investment Union Ltd are the continuing growth of equity capital, net earnings, absolute and relative profits, the high-quality loan book, and the relatively low funding costs.

In the first quarter of 2014, Commercial Bank Investment Union Ltd increased its equity capital by 5.5% from RUB 774.6 billion to RUB 817.6 billion; in April 2014 alone, the Bank's equity capital further increased by 3.9% to RUB 849.4 billion.

Net income of Commercial Bank Investment Union Ltd for January-March 2014 increased by 17.2% against the same period in 2013 and exceeded RUB 76.6 million.

At the end of the first quarter of 2014, CB Investment Union's net profit reached RUB 4.4 million against a negative profit for the same period the year before.

At the same time, the Bank's relative profitability expressed by return ratios also witnessed certain improvements. For the 12-month period ending on April 1, 2014 (against calendar year 2013), the Bank's return on assets increased from 0.84% to 0.90%, return on equity from 6.35% to 6.60%.

CB Investment Union's loan book is of relatively good quality. At the end of the first quarter of 2014, loans of quality grades 1 and 2 accounted for almost 81.5% of the total loan portfolio, while the share of non-performing loans was a mere 0.8%, i.e. almost five times below the average percentage in Russia's banking sector. These strong results are obviously attributable to the Bank's well thought-out and deliberate lending policy.

In the last seven full years and in the first quarter of 2014, the funds raised by the Bank cost it less than the Bank of Russia's refinancing rate, which we appreciate as a positive signal for its credit rating. At the end of the first quarter of 2014, CB Investment Union's cost of debt was 5.37% p.a., the interest rate on customer deposits 5.07% p.a. It should be noted that the Bank enjoyed much cheaper borrowings in the first quarter of 2014 than in the same months of 2013.

At the same time, the somewhat lower assets, a reduction in funds placed by companies and enterprises and growing loan arrears are putting pressure on the credit rating of Commercial Bank Investment Union Ltd.

For the first quarter of 2014, CB Investment Union's assets decreased by 5.1%, indicating a recent cutback in the scale of operations.

To a large extent, this reduction is attributable to shrinking deposits of companies and enterprises. In January-March 2014, the amount of funds raised from legal entities decreased by 12.6%, which is a risk-generating factor.

The Bank's credit profile is significantly weakened by the growing loan arrears. For the first quarter of 2014 the total arrearage soared from RUB 3.7 million to RUB 41.9 million, i.e. more than 11 times, the share of loan arrears in the loan portfolio reached 2.7% (the average percentage in Russia's banking sector being 4.4%).

Commercial Bank Investment Union Ltd has been operating in the market of banking services since 1990. The Bank qualifies as a mid-sized Russian credit institution in terms of the amount of business, maintaining a good pace of development. CB Investment Union Ltd is registered in Moscow and has 3 branches in Makhachkala, Voronezh, and Krasnoyarsk. The Bank's PoS network comprises 6 satellite offices, one loan desk and 15 stand-alone cash desks. As of April 1, 2014, the Bank ranked 342nd in Russia in terms of asset size (383th the year before).

The bank provides the whole range of services involving Russian rubles and foreign currencies, offers lending programs and deposit products for individuals.

As of April 1, 2014, the Bank's assets amounted to RUB 5.98 billion (against RUB 4.9 billion the year before), equity capital totaled RUB 0.82 billion (RUB 0.69 billion the year before). CB Investment Union Ltd is licensed for banking operations by the Central Bank of the Russian Federation (license no. 637 as of October 16, 2003). In September 2005, CB Investment Union Ltd was registered as a member of the Deposit Insurance Scheme.

Full Bank name: Commercial Bank Investment Union Ltd.

The Bank's auditor is RIAN-AUDIT LLC, a member of the self-regulatory organization Nonprofit Partnership Moscow Audit Chamber (NP MoAP). Principal Number of Registration Entry (ORNZ): 10303005835 as of December 28, 2009.

This press release is based on the Statement of assignment of a credit rating to Commercial Bank Investment Union Ltd.

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 Analysis, Consulting and Marketing Rating Agency
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www.akmrating.ru
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.