CJSC AK&M Rating Agency affirmed the national scale credit rating of OJSC MJSB Tempbank (license no. 55) on the national scale at 'B++', tier 2. The outlook is stable.

The 'B++' rating indicates that OJSC MJSB Tempbank qualifies as a sufficiently creditworthy borrower. The risk of a delay in meeting obligations is moderate, the full or partial debt restructuring risk is insignificant.

The key positive rating drivers for OJSC MJSB Tempbank are the continuing growth of assets, equity capital, net earnings, profits and profitability ratios, the higher amount of deposits made by retail customers, companies and other non-credit institutions, and a strong liquidity position.

OJSC MJSB Tempbank's assets have been growing steadily for the last three years. In particular, their total amount increased by 16.7% in 2013, by 6.5% in the first quarter of 2014.

To a certain extent, this growth was driven by an increase in the amount of deposits made by retail customers, companies and organizations. In the first quarter of 2014 alone, the total amount of funds raised from these groups of depositors increased by 9.8%, retail deposits by 2%.

The equity capital also continued to grow. In particular, it went up 50% in 2013 and further improved by almost 12% in the first quarter of 2014.

OJSC MJSB Tempbank's net earnings increased by 26.9% in 2013 and showed a further 7% growth in the first quarter of 2014 reaching RUB 748.7 million 

There has been no clear-cut trend in the Bank's net profit performance lately. In 2013, the Bank's net profit shrank twice against the previous year. However, OJSC MJSB Tempbank staged a powerful comeback in the first quarter of 2014 earning RUB 26.4 million in net profit, almost 46% above the 12-month net profit in 2013.

The higher profit improved the Bank's relative profitability ratios. For the 12-month period ending on April 1, 2014 (against calendar year 2013) its return on assets increased from 0.6% to 0.7%, return on equity from 4.8% to 5.7%.

The Bank's smart management policy ensured a good liquidity position. On May 1, 2014, Tempbank's instant liquidity ratio reached 65.8%, current liquidity ratio 81%, long-term liquidity ratio 37.4%. Therefore, all the liquidity ratios of OJSC MJSB Tempbank have looked fine compared with the average levels in Russia's banking sector in 2014.

At the same time, the overall loan portfolio deterioration (primarily, the lower share of prime loans), the growing funding costs and negative changes in loan arrears are putting pressure on the credit rating of OJSC MJSB Tempbank.

By May 1, 2014, the total amount of quality grade 1 loans had decreased by 26.7%, their share in the loan book to 8.5%. The share of quality grade 2 loans decreased by 3%. At the same time, the total amount of doubtful loans grew by 13.8%, the amount of problem loans shot up by almost 82%, while the amount of non-performing loans increased by 6.3%. As a result, the combined share of doubtful, problem and non-performing loans in the Bank's loan portfolio approached 20% (for reference, the average combined percentage for such loans does not exceed 14% in Russia's banking sector).

The negative changes in loan arrears are one of the key constraints on the rating of OJSC MJSB Tempbank. The total debt in arrears picked up significantly in 2013 and further increased by 0.3% in the first quarter of 2014 approaching 7% of the loan portfolio. While the Bank was successful in reducing the total arrears by almost 16% in the second quarter, they still accounted for 6.4% of the loan portfolio on June 1, 2014, i.e. twice above the average level in Russia's banking sector.

While being below the key rate of the Bank of Russia, the cost of capital for OJSC MJSB Tempbank has been growing since 2012. As of April 1, 2014, the cost of debt was 6.87%, the interest rate on customer deposits 6.77% p.a. This trend generates certain creditworthiness risks that cannot be ignored.

OJSC MJSB Tempbank has been operating in the market of banking services since 1989. The Bank of Russia assigned it registration no. 55 on January 24, 1989. The bank provides all types of banking services involving Russian rubles and foreign currencies, specializing in lending, cash and settlement services. The Bank's assets as of April 1, 2014 totaled RUB 10,572 million, equity capital amounted to RUB 1,209 million.

On April 1, 2013, the Bank ranked 250th in assets (against 271st the year before), 304th in equity (against 325th the year before), 347th in retained earnings (against 552nd the year before), as estimated by Interfax-Center for Economic Analysis.

The Bank qualifies as a medium-sized Russian credit institution in terms of asset size, equity capital and volume of operations. The Bank's core business is the provision of comprehensive services to corporate and private customers.

The Bank's auditor is RIAN-AUDIT LLC, a member of the self-regulatory organization Nonprofit Partnership Moscow Audit Chamber (NP MoAP). Principal Number of Registration Entry (ORNZ): 10303005835 as of December 28, 2009.

Full Bank name: Open Joint-Stock Company "Moscow Joint-Stock Bank "Tempbank".

Short name: OJSC MJSB Tempbank.

This press release is based on the Statement of assignment of a credit rating to OJSC MJSB Tempbank.

The rating, 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.

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 Analysis, Consulting and Marketing 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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