The 'B+' rating indicates that JSCB Russian Trust Bank qualifies as a sufficiently reliable borrower. The risk of complete or partial debt restructuring is low. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. August 14, 2015.

JSCB Russian Trust Bank is a small-scale Russian credit institution headquartered in Moscow. Apart from the head office, the Bank has one supplementary office and 3 loan desks. The bank provides all types of services involving Russian rubles and foreign currencies to legal entities and individuals. JSCB Russian Trust Bank ranks in the 200-300 range among Russian banks in terms of asset size, in the 300-400 range in terms of equity capital.

The Bank's credit rating is constrained by loan portfolio impairments, losses from operations, heavy dependence on the speculative component, an outflow of corporate deposits.

Net loans receivable accounting for the greater part (85%) of the Bank's assets saw quality impairments in the period under review. Over the period from June 1, 2015 to June 1, 2016, the share of loans of quality grade 2 decreased by 16.2 p.p. to 71.7%, while the share of doubtful loans increased from 4.9% to 20.4%. Another point of concern, in AK&M Rating Agency's view, is a low level of security (collateral) for the Bank's loan portfolio (approximately 40%).

Early this year, JSCB Russian Trust Bank increased provisions almost twice from RUB 412.7 million to RUB 803.7 million, which produced a negative impact on its capitalization and profitability. Equity capital dropped by 75.2% in January, with the result that the Bank failed to meet several statutory ratios. In the following 4 months, however, the Bank benefiting from the shareholders' support increased equity capital 3.2 times, which improved the statutory ratios to levels meeting the regulatory requirements.

Another risk factor, in our view, is that the Bank's incomes depend heavily on speculative earnings. Apart from the soaring provisions, losses from forex transactions and foreign currency revaluation made a negative impact on the credit institution's profitability. As a result, the Bank posted a loss of RUB 363.8 million in the first quarter of 2016.

Over the period from June 1, 2015 to June 1, 2016, the amount of corporate deposits decreased by 29.1%, resulting in a weaker diversification of liabilities in terms of funding sources. Retail deposits are currently dominating the Bank's funding base (74.4%, against the average level of 28% in Russia's banking sector).

At the same time, AK&M Rating Agency experts appreciate improvements in borrowings from retail clients, the key source of funding, as a positive rating driver. Retail deposits amount to RUB 3.6 billion growing by 28.7% since the moment of our previous review (June 1, 2015), an evidence of the population's loyalty to the credit institution.

The credit rating is also supported by the Bank's growing assets and ability to keep overdue debt low.

Assets of JSCB Russian Trust Bank increased by 28%, the growth was mainly driven by a loan portfolio expense (+32%). At the same time, the Bank's overdue debt percentage is relatively low. On June 1, 2016, the share of arrears in the loan book was 5.2%, which is below the average percentage in Russia's banking sector (5.7%).

Full Bank name: Joint Stock Commercial Bank «Russian Trust Bank» (joint-stock company)

Short name: JSCB «Russian Trust Bank»  

JSCB Russian Trust Bank has been operating in the market of banking services since 1990. The Bank of Russia assigned it registration no. 1139 as of December 10, 1990. The Bank possesses a license to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of August 26, 2015 and a license to accept ruble-denominated money deposits from individuals as of August 26, 2015. The Bank has been a member of Russia's deposit insurance system since October 14, 2004, DIS registration no. 70.

AK&M Rating Agency assigned a credit rating to JSCB Russian Trust Bank for the first time on June 15, 2015. The last rating action in relation to the Bank was taken on June 15, 2015. All rating action announcements are available on the akmrating.ru website.

The rating is valid until July 2017. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Bank's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the Bank. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

This press release is based on the Statement of assignment of a credit rating to JSCB Russian Trust Bank. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. August 14, 2015.

The rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion 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

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www.akmrating.ru

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