The ‘A’ rating indicates that JSCB Primorye (OAO) (license no. 3001 of the Central bank of the Russian Federation) is qualified as a highly reliable borrower. Risk of a delay in meeting liabilities is relatively low, restructuring risk for the loan / part of the loan is minimal.

A positive argument for the rating score is the firm position of the Bank in the region. As of October 1, 2011, JSCB Primorye (OAO) ranked first among the six banks registered in Primorsky Krai in the net profit secured for the current year and second in the volume of assets and equity capital. As of October 1, 2011, the Bank’s assets reached RUB 25,255.3 million, equity capital was RUB 2,196.7 million.

The capital of JSCB Primorye (OAO) is in satisfactory condition. The quality of the Bank’s capital meets the requirements of the Basel Committee on Banking Supervision, the share of the core capital in 2010-2011 was 78-60 percent.

Capital adequacy ratio of JSCB Primorye (OAO) in 2010-2011 was within the 20% to 11% range. As of October 1, 2011, capital adequacy ratio of the Bank was 11.8%, somewhat below the average value in the banking system of the Russian Federation as of the same date (15.2%).

Throughout all the years under review, JSCB Primorye (OAO) has achieved positive financial results. Net profit for 2010 was RUB 307.9 million. Net profit secured for nine months 2011 reached RUB 661.3 million As a result, return on assets of the bank equaled 4.03%, return on equity was 51.87% - way above the banking average in Russia.

Liabilities of JSCB Primorye (OAO) are well-structured. Over the period from 2009 to the first half year 2011, the share of contributions of physical persons in the Bank’s liabilities fluctuated from 34 to 47 percent, the share of funds of other non-credit institutions varied from 48 to 52 percent, the share of funds of credit institutions from 0 to 16 percent. Since mid- 2010, there has been an upward trend in the volume of funds of credit institutions and the Bank of Russia. As of October 1, 2011, the share of contributions of physical persons in the bank’s liabilities was 36%, exceeding the average Russian level as of the same date (28.4%), the share of funds of other non-credit institutions was 37%, the share of funds of the Bank of Russia (direct REPO) equaled 24%.

Another argument for the rating score is the good liquidity of the bank. All liquidity indicators of the Bank are acceptable and meeting the Central Bank of Russia’s requirements. Instant and current liquidity indicators are above the average level of Russia’s banking system, long-term liquidity was slightly below it.

The quality of the loan portfolio can be regarded as good. As of October 1, 2011, problem loans and NPLs accounted for just 5.44% of the Bank’s loan portfolio. This is clearly below the average level in Russia’s banking sector. As a whole, the shares of class 1 loans and class 2 loans have been growing, the shares of NPLs and problem loans decreasing over the last two days. As of October 1, 2011, arrears on the loans provided by the Bank reached RUB 41 million (which is a mere 0.4% of the total loan assets). This is appreciably below the average level in Russia’s banking system (4.3%).

The rating score is restricted by the low share of the company’s authorized capital in its equity capital (11.38% as of October 1, 2011 against 24.7% on average in Russia’s banking sector as of the same date.

Another thing exerting pressure on the rating score is the essential share of investments in securities. Since the second half year 2010, the volume of investments in debt securities has been growing implying greater risks related to securities as the financial markets lack stability. As of October 1, 2011, securities accounted for 46.7% of all assets of the Bank. The share of federal loan bonds in the Bank’s securities portfolio is 77%. All the bonds shall mature in no more than 3 years and are on the Lombard list of the Bank of Russia.

JSCB Primorye (OAO) has been active in the market of banking services since 1994. The Bank of Russia assigned it registration no. 3001 as of July 27, 1994, license no. 3001 of the Bank of Russia as of December 23, 2004.

JSCB Primorye (OAO) has been participating in the compulsory deposit insurance system (registered under no. 147 as of November 4, 2004). The Bank is principally engaged in providing all kinds of banking products and services involving Russian rubles and foreign currencies, as well as operations in the securities market.

The auditor of the Bank is CJSC BDO, primary state registration number 1037739271701, tax number: INN 7716021332. rian-audit.ru/images/moap.gif

Since May 20, 2009, CJSC BDO has been a member of the self-regulatory organization Audit Chamber of Russia (a non-profit partnership), primary registration number in the register of audit firms: 10201018307. The non-profit partnership Audit Chamber of Russia is registered in the State Register of Self-regulatory Audit Organizations under no. 455 as of October 1, 2009.

This press release is based on the statement of assigning a credit rating to JSCB Primorye (OAO).
The rating score, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's reliability and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities to the Bank.
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 – Provision 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide business banking services to project and engineering entities implementing investment projects), the MICEX (as a prerequisite for including bonds in the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation base, for listing bonds and for providing access to the MICEX+ trading mode). Pursuant to an order of Russia's Government AK&M Ratings count for approving the capitalization increase procedure for 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