The ‘B++’ rating indicates that CB Investment Union Ltd is qualified as a sufficiently reliable borrower (the highest rating of the ‘B’ grade). Risk of a delay in meeting liabilities is moderate, restructuring risk for a loan / part of a loan is insignificant.

We appreciate the growing equity capital, high capital quality, favorable structure of loan assets, higher net incomes and lower funding costs as the essential positive rating drivers for CB Investment Union.

The Bank’s equity capital has been continuously growing over the last six years. In 2012 and the first quarter of 2013, the Bank’s equity capital increased 1.75-fold, the growth rate being much above the average level in Russia's banking sector (49.1% against 16.6% on average in 2012, 17.6% against 3.06% in the first quarter of 2013).

The Bank maintains high capital quality. As of April 1, 2013, the Tier 1 capital accounted for 76.71% of its total equity capital; capital quality ratio (Tier 2 to Tier 1 capital ratio) on the same date was 30.37% – a quite impressive result compared with the average capital quality ratio in Russia’s banking sector at the end of the first quarter 2013 (49.1%, corresponding to the average Tier 1 capital percentage of 67.1%).

The favorable loan portfolio structure also contributes to the rating of CB Investment Union Ltd. Of special note is the fairly low level of loan arrears (a mere 0.74% of the total amount of loans receivable and their equivalents as of April 1, 2013, 6 times below the average percentage in Russia’s banking sector). The so-called problem and non-performing loans accounted for 1.8% of the total loan portfolio of CB Investment Union Ltd on the same date, which is almost 4 times below the average level in Russia's banking sector. Also, the share of high-grade loans (quality grades 1 and 2) in the loan portfolio of CB Investment Union Ltd as of April 1, 2013 was above the average percentage in Russia’s banking system. These figures indicate that the Bank’s lending policy is rather competent and well-balanced.

The Bank’s net incomes are on the rise: in the first quarter of 2013 alone, they increased by almost 8.5%.

The Bank’s cheaper borrowing opportunities (the cost of debt being 6.21% in 2012 and 5.94% at the end of Q1 2013, against 6.95% per annum in 2011) are favorable for its credit rating. The cost of customer deposits decreased from 7.79% to 5.82% per annum in 2012, and reached 5.38% at the end of March 2013.

At the same time, the slower net profit growth, low return ratios, a reduction in assets and borrowed funds, growing loan arrears are working against the rating of CB Investment Union Ltd.

The Bank’s net profit growth slowed down in 2013. For four months 2013, net profit of CB Investment Union Ltd. hardly exceeded RUB 1 million, which is much below the result achieved in January-April 2012. As a result, the Bank faces low return ratios, (3-4 times below the average levels in Russia’s banking sector). As of April 1, 2013, return on assets of CB Investment Union Ltd was 0.6%, return on equity was 4.2%.

The lower capital raising performance in the first quarter 2013 is another negative signal for the Bank’s rating. In the first quarter of 2013, total liabilities of CB Investment Union Ltd decreased by 8.9%. This, to a certain extent, affected the Bank’s assets (-8% over the same period).

The share of loan arrears in the Bank’s loan portfolio increased in 2013, which is unfavorable for its rating. However, while growing by 48.7% in the first quarter of 2013, the loan arrears still account for less than 1% of the Bank’s loan portfolio, which offsets the magnitude of this negative driver.

CB Investment Union Ltd which has been operating in the market of banking services since 1990 is currently a mid-sized credit institution in terms of its operations, maintaining a good pace of development. The bank registered in Moscow has 3 branches in Makhachkala, Voronezh and Krasnoyarsk. The Bank’s PoS network comprises 6 satellite offices, one loan desk and 30 stand-alone cash desks. As of April 1, 2013, the Bank ranked 383rd in Russia in the amount of assets (440th the year before).

The bank provides the whole range of services involving Russian rubles and foreign currencies, offers lending programs and deposit products for individuals.

As of April 1, 2013, the Bank’s assets amounted to RUB 4.9 billion (against RUB 3.1 billion the year before), equity capital totaled RUB 0.69 billion (RUB 0.58 billion the year before). CB Investment Union Ltd is licensed for banking operations by the Central Bank of the Russian Federation (license no. 637 as of October 16, 2003). In September 2005, CB Investment Union Ltd was registered as a member of the Deposit Insurance Scheme.

Full name: Commercial Bank Investment Union Ltd.

Short name: CB Investment Union Ltd.

The Bank's auditor is Vneshgen audit LLC, license no. E 003868 as of 4/7/2003.2

This press release is based on the statement of assigning a credit rating to Commercial Bank Investment Union Ltd.

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.

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