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.

OJSC MJSB Tempbank is headquartered in Moscow. The bank has 24 customer service outlets in 14 regions of Russia. Apart from its HQ, the bank's network currently includes 11 branches, 7 satellite offices, 2 operational offices and 3 stand-alone cash desks.

OJSC MJSB Tempbank has a fairly sustainable position in the Russian market of banking services. As of May 1, 2015, the Bank was in the 200-300 range among Russian banks in terms of asset size and equity capital; among the 437 banks of Moscow and Moscow region, the bank was in the 100-200 range in terms of asset size and equity capital, in the 200-300 range in terms of net profit as of the same date.

OJSC MJSB Tempbank provides a wide range of banking products and services involving Russian rubles and foreign currencies.

The Bank's credit rating is essentially supported by its growing balance sheet performance, higher capital and profitable operations.

Assets and liabilities of the Bank were on a positive trend with appreciable growth rates both in 2014 (+17.5% and +20.3%, respectively) and in the first quarter of 2015 (6.3% and 4.2%, respectively), a strong result particularly compared with a generally negative trend in banks' assets and liabilities across Russia's banking sector. 

In January 2015, the Bank actually placed an additional issue of shares increasing its authorized capital to RUB 789 million, its equity capital to RUB 1,420.7 million. The Bank's capital adequacy ratio exceeds 12.0%, an evidence of its high potential for the further growth of earning assets.

We appreciate the Bank's sustainably profitable operations. In 2014, pre-tax profit exceeded the previous year's level by 40.1%. The Bank's 3-month profit in 2015, despite a reduction by 17.9%, is commensurate with its earnings for the same accounting period of 2014, a praiseworthy result compared with the 97% slump in Russia's banking sector).

At the same time, it should be noted that the Bank's lending and deposit policy stayed well-balanced against the background of growing loans receivable, which is proven by a comfortable net interest spread ratio staying equal to or above 5% on the reporting dates in 2014-2015.

In September 2014, a number of the Bank's performance ratios (N1, N1.2, N3) were close to the lower regulatory thresholds, which, in AK&M Rating Agency's view, triggered the rating tier downgrade. As of May 1, 2015, the Bank improved these ratios substantially (N1 = 12.5%, N1.2 = 8.4%, N3 = 89.2%) removing pressure its credit rating.

At the same time, the credit rating is constrained by the high percentage of the Bank's loan arrears, the loan portfolio deterioration, and rather modest provisions.

The percentage of overdue loans stays at ca. 5.5%, 1.2 times the average level in Russia's banking sector. The share of loans with payment delays exceeding 30 days (i.e. to a large extent, potentially non-repayable loans) grew from 3.7% to 5.4%, and the combined share of problem and non-performing loans increased twice, naturally resulting in a loan portfolio deterioration.

Another point of concern is the Bank's low provisions for possible loan losses (almost twice below the combined amount of loans of quality grades 4 and 5), indicating an insufficiently conservative approach to loan provisioning.

The meager loan provisions may come to be critical in the context of the overall loan portfolio weakness, seeing as our review of the Bank's loan book has revealed a high percentage of borrowers with doubtful solvency.

Full Bank name: open joint-stock company Moscow joint-stock Bank Tempbank.

Short name: OJSC MJSB Tempbank.

OJSC MJSB Tempbank operating in the market of banking services since 1989 is licensed by the Bank of Russia (license no. 55 as of May 29, 2012).

The Bank is a member of Russia's compulsory deposit insurance system (DIS registration no. 624 as of February 10, 2005).

The rating assignment is based on the Credit Rating Methodology for Banks and their Debt Instruments (AK&M Rating Agency, 2014).

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.

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.

AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.