CJSC AK&M Rating Agency affirmed the national scale credit rating of National Standard Bank LLC at 'A+'. The outlook is stable.

The 'A+' rating indicates that Commercial Bank National Standard Limited Liability Company qualifies as a highly creditworthy borrower. Risk of a delay in meeting liabilities is insignificant.

We regard the continuing growth of profits and higher return ratios, the high equity capital adequacy, the ongoing optimization of the asset profile (as evidenced by the narrower portfolio of securities and the growing loans receivable), the strong loan portfolio (including fairly low loan arrears, a small percentage of problem and non-performing loans), and relatively low funding costs as the key positive rating drivers for National Standard Bank LLC.

In the first quarter of 2014, the Bank's net profit increased by almost 13% year-on-year. As a result, net profit of National Standard Bank LLC for the 12-month period ending on April 1, 2014 reached RUB 325.1 million, more than in any calendar year over the last decade.

At the same time, the Bank's relative profitability also improved. For the 12-month period ending on April 1, 2014 (against calendar year 2013), return on assets of National Standard Bank LLC grew from 0.80% to 0.84%, return on equity from 5.79% to 5.95%.

In the first quarter of 2014, National Standard Bank LLC significantly improved its capital adequacy, resulting in a higher CAR ratio (13.3% against 12.1%). Therefore, the Bank's N1.0 ratio went above the average level in Russia's banking sector in 2014.

As follows from our analysis, National Standard Bank LLC is pursuing a smart asset structure optimization strategy assuming a narrower portfolio of securities and efforts to increase loans receivable. For the first quarter of 2014, the Bank's net loans receivable went up from RUB 29.2 billion to RUB 30.3 billion (+4%). Also, the percentage of net loans receivable in National Standard Bank's assets increased to almost 65%, approaching the average level in Russia's banking sector (71%). At the same time, the net investments in securities for the three-month period in 2014 dropped almost twice from RUB 20.2 billion to RUB 11.9 billion. As a result, the share of net investments in securities in the Bank's assets decreased to 25.6% (the average percentage in Russia's banking sector being ca. 14%).

The Bank benefits from a fairly well-structured loan portfolio. As of the end of Q1 2014, the share of high-grade loans (classes 1 and 2) at National Standard Bank LLC was almost 82%, while the share of non-performing loans was a mere 0.44% (i.e. almost 9 times below the average percentage in Russia's banking sector), the share of problem loans was only 0.03% (almost 79 times below the average level).

AK&M Rating Agency also appreciates the Bank's fairly low loan arrears. For January-March 2014, National Standard Bank LLC reduced the amount of overdue loans to 1.9% of the total loan portfolio (almost 2.5 times below the average level in Russia's banking sector. These improvements obviously result from a well thought-out and deliberate lending policy of the Bank.

In 2011-2013 and in the first quarter of 2014, the funds raised by the Bank cost it less than the Bank of Russia's refinancing rate, which we appreciate as a positive signal for its credit rating. It should be noted that the Bank enjoyed cheaper borrowings in the first quarter of 2014 than in 2013. At the end of March, the cost of debt was 5.87% per annum, the interest rate on customer deposits was 5.31% per annum.

At the same time, the shrinking assets, the high concentration of liabilities in major depositors and the stagnating equity capital are working against the credit rating of National Standard Bank LLC.

For the first quarter of 2014, National Standard Bank's assets decreased by 11.3%, resulting, to a certain extent, from the significantly lower investments in securities.

The concentration of obligations in major depositors remains high, which is generating risks for the Bank. At the end of the first quarter of 2014, the ten largest groups of investors accounted for almost 74% of the total liabilities of National Standard Bank LLC.

As follows from our analysis of different equity capital calculation methods used in parallel for the Bank's current reports, National Standard Bank LLC is facing a stagnation of equity capital this year, which we regard as a negative rating driver.

National Standard Bank LLC operating in the market of banking services since 2002 has recently been among the 100 major Russian banks in terms of assets and equity capital. As of April 1, 2014, the Bank ranked 98th in terms of asset size, 102nd in equity capital, 133rd in retained earnings in Russia, as estimated by Interfax-Center for Economic Analysis. The Bank's assets totaled RUB 46,855 million, equity capital was RUB 6,813 million.

National Standard Bank LLC is licensed by the Bank of Russia to provide banking services involving Russian rubles and foreign currencies to individuals and legal entities and possesses non-expiring licenses for professional dealer, brokerage, custody, and securities management activities. National Standard Bank LLC is registered as a member of the deposit insurance scheme. Alongside with all kinds of banking services, the Bank is committed to investment activities. National Standard Bank LLC focuses on services and loans to corporate customers, operations in the securities market. The retail segment is not among its development priorities.

National Standard Bank LLC is the parent credit institution of a consolidated banking group, with JSC CB Russky Yuzhny Bank and NS-Finance LLC as subsidiaries.

Headquartered in Moscow, National Standard Bank LLC has two branches in Stary Oskol, Belgorod region, and in Novorossiysk, Krasnodar Krai. The Bank has four supplementary business units: two satellite offices in Moscow, one in Novorossiysk, and one operational office in Voronezh.

Full Bank name: Commercial Bank National Standard Limited Liability Company.

Short Bank name: National Standard Bank LLC.

The Bank's reports are audited by CJSC Deloitte & Touche CIS.

This press release is based on the Statement of assignment of a creditworthiness rating to National Standard Bank LLC.

The rating assigned, 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 to the Bank.

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.

CJSC 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.

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