CJSC AK&M Rating Agency affirmed the national scale credit rating of CB Altaikapitalbank Limited (license no. 2659) at 'B++', tier 3. The outlook is stable.

The 'B++' rating indicates that CB Altaikapitalbank Limited qualifies as a sufficiently creditworthy borrower. The risk of a delay in meeting obligations is moderate, the full or partial debt restructuring risk is insignificant.

CB Altaikapitalbank Limited qualifies as a medium-sized Russian credit institution in terms of the amount of business. As of April 1, 2014, the Bank ranks 467th in terms of asset size, 450th in the equity capital size, 220th in retained earnings among Russian banks.

Headquartered in Barnaul (Altai Krai), the Bank has supplementary units in Altai Krai and the Altai Republic.

The Bank provides all types of services to legal entities and individuals.

We appreciate the Bank's high capital adequacy and quality, well-structured and improving net earnings, profitable operations, and strong liquidity position as the key positive rating drivers.

The size of the Bank's capital enables it to raise more funds over time. As of July 1, 2014, the Bank's capital amounted to RUB 578.47 million, the capital adequacy ratio being 13.98%, exceeding the average levels in Russia's banking sector on most of the reporting dates in 2013-2014. The Bank has been steadily improving the quality of capital since 2013, its Tier 2 to Tier 1 capital ratio decreasing to 11.23%, which fully meets the Central Bank of Russia's guideline (no more than 30%). 

Most of the Bank's equity capital arises from retained earnings (77.2%) and authorized capital (17.4%), which we appreciate as another positive signal.

The Bank has a sustainable and improving net income profile, which, in our view, contributes to its credit worthiness. Earnings from banking operations and other transactions mainly arising from a steady inflow of interest and commission receipts account for 45.9% to 52.9% of the total income. In 2013, the total amount of net earnings increased by RUB 27.2 million (2.7%), contributing to the upward trend we noted in 2012. In the first half of 2014, the Bank's net income increased by RUB 47.0 million (9.7%) against the same period in 2013.

The high earnings catalyzed the positive profitability of the Bank's operations. In 2013, its pre-tax profit reached RUB 83.8 million, profit after tax totaled RUB 53.0 million (RUB 60.5 million and RUB 57.9 million, respectively, in the first half-year 2014). In relative terms, the Bank's profitability is also appreciably high, as evidenced by the good ROA and ROE ratios (2.6% and 14%, respectively, both exceeding the average levels in Russia's banking system.

At the same time, the Bank's credit rating is constrained by the lower deposits of legal entities, the absence of marked KPI improvements, and a weaker loan book.

We regard the shrinking deposits of non-credit institutions as a risk factor for the Bank. In 2014, they dropped by RUB 363.6 million (- 20.5%) to RUB 1,852.7 million, falling below the start of 2013. The other funding sources (including personal deposits), despite their growth, could not offset this negative impact. As a result, the Bank's key balance sheet indicators (assets and liabilities) declined in 2014 to levels comparable to the start of 2013 (assets up 1.2%, liabilities down 2.6%).

AK&M Rating Agency's analysis of the Bank's loan portfolio quality has shown that the combined share of the loans of quality grades 1 and 2 decreased to 77.06%, while the combined share doubtful and non-performing loans, on the contrary, increased to 10.05% (1.12 times and 1.65 times worse than the average levels in Russia's banking system, respectively).

The permanently high concentration of liabilities in one group of investors is also putting negative pressure on the rating. On most of the reporting dates in 2013-2014, this ratio did not fall below 21%.

Full Bank name: Commercial Bank Altaikapitalbank Limited

Short name: Altaikapitalbank

The bank is licensed to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of March 16, 2010 and a license to accept ruble-denominated and foreign currency-denominated money deposits from individuals as of March 16, 2010. The Bank is a membe of the deposit insurance system, reg. no. 83 as of October 14, 2004.

CB Altaikapitalbank Limited provides the whole range of banking products and services involving Russian rubles and foreign currencies. Headquartered in Barnaul, the Bank has a branch network in Altai Krai and the Altai Republic.

This press release is based on the Statement of assignment of a credit rating to CB Altaikapitalbank Limited.

The 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.

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.