The 'B++' rating indicates that PIR Bank, llc 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.

PIR Bank, llc headquartered in Moscow does not have a regional network of structural units. The Bank provides a complete range of banking products and services involving Russian rubles and foreign currencies to retail and corporate customers.

PIR Bank, llc qualifies as a medium-sized Russian credit institution in terms of the amount of business. As of January 1, 2015, the Bank ranked 307th in terms of asset size, 305th in terms of equity capital, 356th in terms of net profit among Russian banks. As of February 1, 2015, PIR Bank, llc was in the 100-200 range among 446 banks operating in Moscow and Moscow region in terms of asset size and net profit in the 200-300 range in terms of equity capital.

The Bank's credit rating is essentially supported by the growth of its key balance sheet indicators (assets and liabilities), profitable operations, well-balanced interest policy and strong liquidity and credit risk metrics.

For 12 months of 2014, the Bank's liabilities increased by 7.8%; the positive trend persisted in January 2015 as the liabilities reached RUB 6,875.7 million. The growth of deposits was driven by both the client base expansion and the higher balances of existing clients' accounts. Although the Bank's equity capital looked down, the capital adequacy ratio stayed comfortably high (13.9% as of January 1, 2015). The combined effect of these achievements provided the Bank with opportunities to expand the amount of asset-related transactions.

In 2014, PIR Bank, llc kept the level of net loans receivable high (64%), which enabled it to increase interest incomes by 38% (to RUB 871.8 million). This strong performance results from the Bank's effective interest policy to keep the deposit and loan interest rates well-balanced, as evidenced by the broad net interest spread (at least 6.7%, reaching 9% at the end of 2014).

Another effect of the higher liabilities is an increase in the share of highly liquid assets from 25% to 31%, which is of essential importance for the Bank, given the high percentage of private deposits. The asset liquidity improvements reduce the Bank's liquidity risks should a stress scenario play out.

AK&M Rating Agency is please to note that the Bank's operations were profitable despite the adverse economic environment. Pre-tax profit for 2014 totaled RUB 92.6 million, profit after tax was RUB 64.1 million. The Bank's ROA and ROE ratios remained commensurate with the average values in Russia's banking sector. A remarkable thing is that the Bank achieved an impressive financial result of RUB 14.6 million in January 2015.

In 2014, the Bank never failed to meet the applicable liquidity and credit risk requirements in the period under review, the corresponding ratios being appreciably far away from the regulatory limits, which proves the Bank's ability to fully meet its obligations.

At the same time, the low diversification of funding sources, the loan book erosion and the higher loan arrears are working against a higher credit rating.

We regard the extremely low funding base diversification as a point of concern for the Bank. As of February 1, 2015, customer deposits accounted for 98.5% of the Bank's total liabilities, retail deposits for two-thirds of the total borrowings. Given that this funding source can be extremely volatile as the economy faces crisis effects, its dominance poses high risks of insolvency which the Bank might face should the funding base shrink.

Another rating constraint for PIR Bank, llc is the obvious structural degradation of the loan portfolio in 2014, primarily regarding the share of loans of quality grade 5 (NPLs) increasing from 11.3% to 16.9%, three times above the average percentage in Russia's banking sector.

Arrears on the loans provided by the Bank is also growing fast. The share of potentially non-repayable loans (with payment delays exceeding 30 calendar days) reached 16%.

The Bank's aggressive lending policy aimed to earn a high interest income by investing in high-risk assets generates additional risks for the credit institution.

Given the absence of backing from the Bank owners and the Russian Government, the standalone credit rating was not assigned to the Bank.

Official Bank name: PIR Bank, llc.

PIR Bank, llc has been operating in the market of banking services since 1994. The Bank is licensed by the Central Bank of the Russian Federation (general banking license no. 2655 as of January 24, 2013) and  is a member of the deposit insurance system (reg. no. 284 as of December 9, 2004).

This press release is based on the Statement of assignment of a credit rating to PIR Bank, llc. and the Credit Rating Methodology for Banks and their Debt Instruments.

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.

AK&M 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.

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