CJSC AK&M Rating Agency affirmed the national scale credit rating of  CB Intercapital-Bank LLC (license no. 2706) at 'B++' (tier 3). The outlook is stable.

The 'B++' rating indicates that CB Intercapital-Bank LLC qualifies as a sufficiently creditworthy borrower. Risk of a delay in meeting obligations is moderate, full or partial debt restructuring risk is insignificant.

The credit rating is supported by the Bank's high capital adequacy and quality, growing incomes, and good loan portfolio quality.

Intercapital-Bank's capital adequacy ratio (N1.0) is far above the average level in Russia's banking sector, hitting the lowest level (33.1%) on January 1, 2013, while the peak value of 58.0% was registered on September 1, 2013. As of April 1, 2014, the Bank's capital adequacy ratio stood at 47.4%. As of May 1, 2014, the Bank's authorized capital was the main equity capital source (more than 60%). On May 1, 2014, the equity capital amounted to RUB 791.5 million, the authorized capital totaled RUB 480.0 million. In 2013, the Bank's equity capital increased by 25.4%, the authorized capital by 14.8%. No major changes have been detected since the start of 2014.

Since our previous review, the Bank's Tier 2 to Tier 1 capital ratio (capital quality ratio) has not exceeded the level recommended by the Central Bank of Russia (30%).

In the first quarter of 2014, the Bank's total income grew by RUB 266.54 million (51.8%) compared with the first quarter of 2013, primarily due to an increase in operating incomes by RUB 274.24 million (67.0%). As of April 1, 2014, the main sources of income derived from banking transactions and other operations were interest earnings (42.6%), earnings from forex transactions (36.4%) and earnings from cash and settlement services (19.4%). In absolute terms, income derived from banking transactions and other operations amounted to RUB 381.82 million in 2013, RUB 100 million in the first quarter of 2014. The Bank's balance sheet profit for January-March 2014 reached RUB 2.53 million, exceeding the average quarterly profit in 2013.

The Bank has a relatively sound loan portfolio. As of May 1, 2014, prime loans accounted for 22.0%, nonprime loans for 52.1%, doubtful loans for 20.4% of the loans receivable. The share of problem and non-performing loans was low (6.3%), approximately 4.3% of the total debt was in arrears, while debt provisions reach 20.8%.

The maximum amount of major credit risks (N7 ratio, 67.6% as of May 1, 2014), maximum amount of credit risk per borrower or group of related borrowers (N6 ratio), and total magnitude of insider-specific risk (N10.1 ratio, 2.2% as of May 1, 2014) are not approaching the upper limits.

At the same time, the Bank's rating is impaired by the shrinking assets and liabilities in 2013 and the high volatility of balances on legal entities' deposits.

In 2013, both assets and liabilities of the Bank decreased by 46.2% and 59.3%, respectively. On the asset side, net loans receivable decreased by by 40.7%, deposits with the Central Bank of Russia by 72.6%, deposits with credit institutions by 62.9%. At the same time, the amount of cash resources and their equivalents increased by 93.2%. On the liabilities side, the balances on accounts of customers qualifying as non-credit institutions dropped by 62.4%, the debt securities issued by 76.2%. As of April 1, 2014, the Bank's loans receivable decreased by 8.9%, cash funds increased by 81.4%, deposits with the Central Bank of Russia grew more than 1.5 times.

In 2013 and early 2014, the balances of legal entities' accounts lacked stability. Sharp monthly rises and drops reach approximately 30% of the average level. Only January-February 2014 saw steady and fairly high balances. It should be noted that the Bank does not accept private deposits, which makes legal entities' deposits the backbone of the Bank's funding base. Another destabilizing factor is the high concentration of liabilities in major creditors (depositors), the ten largest groups of investors accounting for ca. 40% of the Bank's total customer liabilities.

Full Bank name: Commercial Bank Intercapital-Bank (Society with Limited Liability). Short name: CB Intercapital-Bank LLC.

The Bank operating in the market of banking services since 1994 was registered by the Bank of Russia under no. 2706. The bank possesses a license for banking operations involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of September 28, 2007. The Bank does not accept money deposits from individuals and is not a member of the compulsory deposit insurance scheme.

Headquartered in Saransk, the Bank is operating branches in Moscow and Tver, a network of outlets in Moscow, Tambov, Nizhny Novgorod, Ufa, Belgorod, and St. Petersburg (a total of 8 different offices). CB Intercapital-Bank LLC provides the whole range of banking services involving Russian rubles and foreign currencies to legal entities, lends to individuals and legal entities, performs operations in the securities market, and provides money transfers denominated in Russian rubles and foreign currencies without opening bank accounts.

This press release is based on the Statement of assignment of a creditworthiness rating to CB Intercapital-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.

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