The negative rating action reflects the Bank's weakening financial position. The scarce portfolio of highly liquid assets and the high share of borrowings through deposits amidst today's financial turmoil have essentially impaired the credit institution's financial sustainability. As of December 1, 2014, retail deposits accounted for 73.7% of the Bank's current assets, while highly liquid assets cover a mere 6.5% of the total amount of funds raised from the population.

In AK&M Rating Agency's view, the Bank has a rather poor foreign exchange position, which generates additional risks amidst the sharp Russian ruble depreciation. The Bank's foreign currency-denominated liabilities exceed currency assets by RUB 455 million.

Corporate deposits have shrunk by 30.3% since the start of the year. The Bank's earnings essentially depend on securities transactions (accounting for 86.0% of the Bank's total net incomes for 9 months of 2014), which, coupled with the net interest component reduction to 8.5% and the loan portfolio expansion, is also putting substantial pressure on the rating.

At the same time, we appreciate the overdue debt reduction (-77% since the start of the year), hence its lower share in the loan portfolio, and the high Bank profitability as positive rating drivers. The Bank's net profit for the 9-month period in 2014 was RUB 815.7 million, far above the result achieved in the same period of 2013 (RUB 1.3 million).

Full Bank name: StarBank Closed Joint Stock Company.

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

Ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

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