The ‘B++' rating cates that JSC Izhcombank is qualified as a sufficiently reliable borrower (the highest sub-grade of the ‘B' grade). Risk of a delay in meeting liabilities is moderate, restructuring risk for a loan / part of a loan is insignificant.

The rating score of this credit institution is essentially supported by the persisting positive trends in the Bank’s development.

This is best proven by the high operating efficiency of the Bank which is steadily improving its KPIs. For the year that ended 6/30/2012, balance sheet profit of JSC IZHCOMBANK totaled RUB 113.4 million exceeding the result achieved over the same period in 2011 almost by half. Also, pre-tax profit of the Bank for 2011 increased more than twice year-on-year. The appreciable increase in earnings produced a positive effect on the Bank’s margin. The ROE and ROA values increased 2.8-fold and 2.4-fold year-to-date, respectively, almost matching the average values in Russia’s banking sector (16.2% against 17.7% for ROE, 1.7% against 2.3% for ROA).

Balance sheet ratios of the Bank are also steadily on the rise. Equity capital of JSC IZHCOMBANK for the period of 1/1/2010 to 7/1/2012 improved by 28%, assets increased by 82%. The average growth rates in Russia’s banking system for the same period are 18% and 50%, respectively.

Another argument for the rating score of the Bank is the traditionally high quality of loan assets. The combined share of problem loans and NPLs in the Bank’s loan portfolio is in the 2.7% … 2.8%, which is essentially below the average level in Russia’s banking system (6.9% as of 7/1/2012). The amount of loans in arrears is looking down. As of the end of the first half year 2012, its relative weight in the total amount of the Bank’s loan assets was 2.9% (against 2.8% in the banking sector of the Russian Federation). The Bank’s corporate loans are well-diversified both across the economy sectors and in the magnitude of risks attributable to borrowers or their groups. Loan portfolio coverage (without guarantees and surety commitments) is 110 … 140%.

The rating score of JSC IZHCOMBANK is additionally supported by the high quality of most of the statutory ratios. As of 7/1/2012, the aggregate quality percentage for credit risk ratios (N7, N9.1, N10.1) estimated according to the Rating Agency’s guidelines, was 92%. The aggregate percentage for liquidity ratios (N2, N3, N4) is 100%.

The Bank’s rating score is restricted by a slowdown in the asset growth rates, the decreasing capital adequacy ratios, the high volatility in liquidity ratios.

The relative growth rate for the Bank’s assets in 2011 was 8.2% and dropped to 2.7% for January-July 2012. This is far below the average values in Russia’s banking sector (23.1% and 6.3%, respectively).

Capital adequacy ratio of the Bank (N1) is gradually decreasing (from 14.9% in 2009 to 11.3% as of 7/1/2012). Even with the same trend in Russia’s banking system in mind, this ratio is seen as fairly poor (34%).

The Bank’s liquidity profile reveals excessive fluctuations. The standard deviation in the aggregate quality percentage reaches almost 30%, generating partial liquidity loss risks for the Bank.

JSC IZHCOMBANK established on the basis of the Udmurt Republican Department of Zhilsotsbank of the USSR has been active in the market of banking services since 1990. The bank comprises 2 operational offices, 16 additional outlets and 8 stand-alone cash desks. One of the Bank’s operational offices is located outside of the Udmurt Republic, namely, in Chaykovsky city, Perm Krai.

The Central Bank of the Russian Federation awarded JSC IZHCOMBANK licenses for banking activities and for accepting deposits of money from the Banking Supervision Committee of the Central Bank permitted JSC IZHCOMBANK to join the Deposit Insurance System (DIS). The Bank’s auditor is CJSC Yekaterinburg Audit Center (license of Russia’s Ministry of Finance no. E 000455 as of 6/25/2012).

JSC IZHCOMBANK focuses on providing all kinds of banking products and services involving Russian rubles and foreign currencies.

At the end of H1 2012, the Bank ranked 291st among Russian banks in the amount of assets, 282nd in the amount of net profit, 212th in the amount of deposits placed by

This press release is based on the statement of assigning a credit rating to JSC Izhcombank.

The credit rating, 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 and for listing bonds). 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: A.V. Khibukhin
Phone no. (495) 916-70-30,
fax no.: (499) 132-69-18.
E-mail: hav@akm.ru