The 'A+' rating indicates that OJSC BALTINVESTBANK qualifies as a highly creditworthy borrower. The risk of a failure to meet obligations in time is insignificant.

OJSC BALTINVESTBANK qualifies as a major Russian credit institution in terms of the amount of business. As of July 1, 2014, the Bank ranked 79th among Russian banks in the size of assets, 111th in the equity capital, 73rd in the amount of retained earnings.

Headquartered in St. Petersburg, OJSC BALTINVESTBANK has a branch network in 18 regions across 5 federal districts of the Russian Federation.

The Bank provides the whole range of banking products and services involving Russian rubles and foreign currencies to legal entities and private customers.

We regard the growing key balance sheet and operational performance indicators in 2013 and the first half of 2014 as a key positive rating driver for the Bank.

In 2013-2014, the Bank's equity capital increased by 21% from RUB 6,381 million to RUB 7,730 million, which laid a foundation for improvements in the balance sheet indicators. As a result, the Bank expanded the range of borrowings and increased liabilities by 9.1% (from RUB 57,514 million to RUB 62,733 million).

The higher funding base resulted in a 10.9% growth of assets (from RUB 61,298 million to RUB 68,009 million), the share of core earning assets (loans) holding steady at 64.5%.

The Bank's income flows were significantly above its expenses in 2013 and the first half of 2014. As a result, the Bank's operating profitability improved and reached the average banking level at the end of 2013, (ROA = 1.9%, ROE = 17.1%).

The Bank's rating also reflects the high probability of support from its owners, as exemplified by the gratuitous transfer of a hotel complex and a package of securities to the Bank.

As a whole, the integral quality of liquidity and credit exposure indices are on an upward trend and have closely approached the average levels in Russia's banking system, indicating a satisfactory risk management policy.

OJSC BALTINVESTBANK benefits from a mature network of sales. Aside from the HQ, the Bank's branch network comprises 54 points of sales in 18 regions in 5 federal districts of Russia, which enables it to diversify the geography of assets and funding base.

At the same time, the shrinking deposits of legal entities and personal customers, the growing funding costs, the weaker loan portfolio and the higher debt arrears are constraining the Bank's rating.

One of the risk factors for the Bank is a reduction in customer deposits. In 2013-2014, deposits of legal entities decreased by RUB 7,739.6 million (-23.7%) to RUB 24,863.9 million, deposits of personal customers by RUB 1,212.5 million (-5.8%). In order to offset and substitute the outflow of customer deposits, the Bank resorted to other funding sources (including funds of the Central Bank of Russia). As a result, the cost of borrowing increased to 6.7% (6.4% at the start of 2013), which negatively affected the profitability of banking transactions.

The recent review of the Bank's loan portfolio quality has revealed that the combined share of loans of quality grades 1 and 2 decreased to 64.6%, while the combined share of doubtful and non-performing loans, on the contrary, increased to 9.9%, which is worse than the average levels in Russia's banking system (86.2% and 6.1%, respectively).

As of August 1, 2014, arrears on the loans provided by the Bank increased by 0.3% against the start of the year to 3.8%, which is also putting some pressure on the credit rating.

Full Bank name: Open Joint Stock Company «Baltic Investment Bank».

Short name: OJSC BALTINVESTBANK.

OJSC BALTINVESTBANK has been operating in the market of banking services since 1994. The Bank possesses general banking license no. 3176 as of March 5, 2012 issued by the Central Bank of the Russian Federation. The Bank is a member of the deposit insurance system, reg. no. 824 as of March 21, 2005.

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

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.

<span class="yaspeller_error" data-spell-word="CJSC">CJSC Analysis, Consulting and Marketing Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. <span class="yaspeller_error" data-spell-word="CJSC">CJSC <span class="yaspeller_error" data-spell-word="AK">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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