The 'B++' rating (tier 3) indicates that Kuznetsky Bank Open JSC 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.

Kuznetsky Bank Open JSC headquartered in Penza city is the only regional bank registered in Penza region. The Bank's regional network comprises 29 service outlets mostly located in Penza and Penza region, with one operational office in the Chuvash Republic.

Kuznetsky Bank's position in the Russian market of banking services can be regarded as relatively stable. As of May 1, 2015, the Bank was in the 400-500 range of the Russian banks in terms of all key financial performance indicators.

Kuznetsky Bank Open JSC provides clients with a wide range of bank products and services. The bank specializes in providing services to SME businesses, accepting retail deposits and lending to private customers.

The positive rating drivers for the Bank includes the growing equity and the high capital adequacy ratios, the good net income diversification, the well-balanced interest policy and the steady profitability.

For 12 months of 2014 and 4 months of 2015, the Bank's equity increased by 10.8% reaching RUB 575 million. The key growth driver was the core capital expansion owing to higher earnings from prior years and an increase in the authorized capital. The equity structure has improved, and the capital quality ratio (Tier 2 to Tier 1 capital ratio) reached 37.6%.

As the Bank's equity capital increased, its total capital adequacy and core capital adequacy ratios exceeded 13.0% and 9.0%, respectively, surpassing the average levels in Russia's banking sector. We appreciate their current levels making the Bank's position strong enough to expand its income generating transactions.

Kuznetsky Bank Open JSC benefits from highly diversified sources of income. The Bank's interest incomes and fee & commission incomes are steady and have a roughly equal relative weight in its earnings profile. The Bank's dependence on speculative activities in the exchange and securities markets is insignificant.

The Bank has preserved a relatively high level of net loans receivable (67%) which insured a steady inflow of net interest income, despite a shrinking loan portfolio. Among other things, 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 7% in 2014-2015)

The Bank kept its activity profitable in 2014 and in January-April 2015. In 2014, amid the crisis, the Bank's financial result was insignificantly worse than in the previous year (-11.4%); in Q1 2015, the Bank posted a profit contrary to its loss in Q1 2014. At the same time, against the backdrop of a weaker performance in Russia's banking sector, the Bank's activities remain steadily high-efficient, with return ratios being three times above the average levels.

At the same time, the Bank's rating is constrained by the lower balance sheet indicators, the weaker loan portfolio and the relatively low provisions.

The key balance sheet performance indicators of Kuznetsky Bank Open JSC have decreased, which puts pressure on the credit rating. Over the period from January 1, 2014 to June 1, 2015, its total assets decreased from RUB 4,278.6 million to RUB 4,208.9 million (-1.6%). Liabilities also looked down (-3.1% from RUB 3,814.2 million to RUB 3,697.3 million).

Another point of concern is the loan portfolio deterioration, the standard and sub-standard loans drifting towards lower quality grades. The combined share of loans of quality grades 4 and 5 (problem and non-performing loans) also remains high, exceeding the average percentage in the Russian banking sector by 3.8 p.p.

At the same time, the provisioning policy of Kuznetsky Bank Open JSC is insufficiently conservative. In particular, the Bank's provisions against possible loan losses exceed the amount of problem and non-performing loans by 69.4% against the average percentage of 91.2% in Russia's banking sector.

Full Bank name: Kuznetsky Bank Open Joint-Stock Company.

Short name: Kuznetsky Bank OJSC.

Kuznetsky Bank Open Joint-Stock Company (CBR license no. 609) has been operating in the market of banking services since 1990. The Bank is licensed to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of October 4, 2012 and a license to accept ruble-denominated money deposits from individuals as of January 19, 2012. The Bank is a member of the deposit insurance scheme, reg. no. 428 as of January 14, 2005.

The rating assignment is based on the Credit Rating Methodology for Banks and their Debt Instruments (AK&M Rating Agency, 2014).

This press release is based on the Statement of assignment of a credit rating to Kuznetsky Bank OJSC.

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.

AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

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