The ‘A’ rating indicates that OJSC Sotsinvestbank qualifies as a highly reliable borrower. Risk of a delay in meeting liabilities is relatively low, restructuring risk for a loan / part of a loan is minimal.

We appreciate the favorable net income structure, well-balanced liabilities, high-quality loan portfolio, low loan arrears and strong liquidity position as the positive rating drivers for the Bank.

OJSC Sotsinvestbank has a favorable structure of earnings: the main source of net income is its net interest margin (58.2% as of April 1, 2013), indicating the Bank’s high commitment to lending as far as its business profile is concerned.

The Bank keeps the concentration of liabilities across the groups of depositors low. As of May 1, 2013, the largest group of depositors accounted for 1.2%, the ten largest investors (groups of investors) for about 4% of the Bank’s liabilities.

OJSC Sotsinvestbank maintains fairly high quality of loan assets, which is a strong argument for its rating. High-grade loans (quality grades 1, 2) are currently dominating the Bank’s lending portfolio, while non-performing and problem loans account for 2.7% of the loan assets as of May 1, 2013, which is below the average value in Russia’s banking sector.

The low percentage of overdue loans also supports the Bank’s rating. As of May 1, 2013, arrears on the loans granted by OJSC Sotsinvestbank and other funds placed by it accounted for 2.7% of the loan portfolio.

All the liquidity ratios are acceptable and meeting the Central Bank of Russia’s requirements. Since our previous review, the Bank has never failed to meet the established liquidity standards. This favorable liquidity position is another positive signal for OJSC Sotsinvestbank.

At the same time, we regard the shrinking net income and profits, lower deposits of non-credit institutions, and poor capital quality as the weak points for the Bank.

The negative changes in the Bank’s net income and profits are exerting certain pressure on the rating. Total net income of OJSC Sotsinvestbank dropped by RUB 24.0 million (‑4.6%) in 2012, further decreased by RUB 8.0 million in the first quarter 2013 (-6.5% against the first quarter 2012).

In 2012, the Bank’s pre-tax profit decreased by RUB 18.1 million (-24.1%), profit after tax by RUB 9.5 million (-38.3%). In the first quarter 2013, pre-tax profit shrank by RUB 11.5 million (-57.0%), profit after tax by RUB 9.0 million (-66.3%). It will be noted that the downward trend is the mainstream in Russia’s banking sector this year. Nevertheless, the quarterly performance of OJSC Sotsinvestbank is above the break-even point, which we appreciate as a positive driver.

Another risk factor for the Bank is a reduction in the deposits of non-credit institutions (by RUB 726.5 million, or 22.7%, in 2012, and by RUB 328.1 million, or 13.3%, for January-March 2013. The reason for this reduction is the repayment of a large deposit.

OJSC Sotsinvestbank still fails to improve its capital quality. Tier 2 to Tier 1 capital ratio currently does not meet the Central Bank of Russia’s guidelines (no more than 30%). As of the latest reporting date (May 1, 2013), this ratio was 93.5%.

OJSC Sotsinvestbank operating in the market of banking services since 1990 is licensed by the Central Bank of the Russian Federation (general banking license no. 1132 as of December 15, 1988).

The Bank participates in the compulsory deposit insurance scheme (registered under no. 50 as of October 7, 2004).

OJSC Sotsinvestbank provides the standard range of banking products and services involving Russian rubles and foreign currencies.

Headquartered at Zeki Velidi Street 42, Ufa, Russia, OJSC Sotsinvestbank has one branch, 38 satellite offices, 57 operational offices and 26 stand-alone cash desks. The bank is operating in two regions of the Russian Federation: Republic of Bashkortostan and Moscow.

The Bank’s auditor is CJSC Yekaterinburg Audit Center, a member of SRO nonprofit partnership Audit Chamber of Russia, principal number of registration entry 10201046624)3

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This press release is based on the statement of assigning a credit rating to OJSC Sotsinvestbank.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Bank’s credit standing and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities to the Bank.

AK&M Rating Agency will not incur any responsibility 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.

AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).

AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Regulation 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide cash and settlement services to project and engineering companies implementing investment projects), the MICEX (for the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation and bond listing purposes). By a resolution of Russia’s Government AK&M Ratings count for the recapitalization of banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.

CJSC Analysis, Consulting and Marketing Rating Agency
ul. Gubkina 3
Moscow, Russia
www.akmrating.ru
Press release by: Y.B. Kuznetsova
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18