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. The rating assignment is based on the Credit Rating Methodology for Banks and their Debt Instruments.

CB Altaikapitalbank Limited is a regional credit establishment ranked in the 400-500 range among Russian banks in terms of assets and equity. The credit institution's branch network including the HQ is located in Altai Krai and the Altai Republic. The bank provides the whole range of services to corporate and private clients.

The credit rating is essentially supported by the good capital adequacy and quality, the profitable operations, the high security of the loan portfolio and high provisions for impairment of loans.

In the period under review, the Bank's capital adequacy remained high, the N1.0 ratio staying in the 14%-17% range, exceeding the average levels in Russia's banking sector. Tier 1 capital is the Bank's main source of equity. As of June 1, 2015, the capital quality ratio (Tier 2 to Tier 1 capital ratio) was 2.2% easily meeting the Central Bank of Russia's requirement (no more than 30%).

In the period analyzed, the financial performance of CB Altaikapitalbank Limited remained positive. In Q1 2015, the Bank's net profit was ca. RUB 2 million, while relative profitability looked down, corresponding to the general negative trend in Russia's banking sector. However, as of April 1, 2015, the Bank's ROE ratio was 8%, ROA was 1.6%, considerably exceeding the average levels (4.8% and 0.5%, respectively).

As of June 1, 2015, the Bank's provisions for possible loan losses totaled RUB 482 million, 40% above the amount of overdue loans. In the period under review, CB Altaikapitalbank Limited maintained a high level of security for the loans provided (103%), which may be used as a source of loss recovery (should the loan risk materialize) and helps strengthen the borrowers' payment discipline.

The Bank's rating is constrained by the substantially lower balance sheet performance (including the shrinking corporate deposits) and the worse loan book.

Since the start of the year, corporate deposits decreased by RUB 242 million to RUB 697 million as of the last reporting date, with ensuing changes in the structure of borrowings, the personal deposits currently being the main source of capital. The share of retail deposits gradually increased in the 15-month period from January 1, 2014 to April 1, 2015 reaching 49.3% as of the last reporting date, far above the average percentage in the banking sector (28.3%). This reduces the Bank's diversification of funding sources, which we regard as one of the negative rating drivers.

The lower corporate deposits resulted in a reduction in liabilities (-14.7% to RUB 342 million in the first quarter of 2015). As a result, the Bank's total assets decreased by RUB 340 million (-11.8%). In particular, net loans receivable dropped by RUB 139 million, deposits with the Central Bank of Russia and with other credit institutions by RUB 92 million and RUB 87 million, respectively.

The Bank's loan portfolio continues to weaken. Over the period from June 1, 2014 to June 1, 2015, the share of non-performing loans increased twice to 10.2% as of the last reporting date (against the average percentage of 5.4% in the Russian banking system). On the contrary, top quality loans (grade 1) have an insignificant share in the loan portfolio of CB Altaikapitalbank Limited (1.1%). Overdue debt grew from 4.02% to 14.54% for the same period, substantially exceeding the average level in Russia's banking sector (4.9%). This powerful growth was mainly driven by an increase in the amount of overdue debts with payment delays under 30 days (RUB 172 million in absolute terms).

Full Bank name: Commercial Bank Altaikapitalbank Limited

Short name: Altaikapitalbank

CB Altaikapitalbank Limited has been operating in the market of banking services since 1994. The Bank of Russia registered it under no. 2659 as of January 21, 1994. The Bank possesses a license to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) and a license to accept ruble-denominated money deposits from individuals, both issued on October 2, 2013. The Bank has been a member of the deposit insurance system since October 14, 2004, DIS registration no. 83.

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