The 'B++' rating indicates that Bank VENETS, JSC 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 rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. August 14, 2015.

Bank VENETS, JSC is an average Russian bank in terms of the amount of business with a relatively small sales network in Ulyanovsk region (10 satellite offices). The bank takes leading positions in the region. The rated Bank ranks in the 300-400 range among Russian banks In terms of asset size, in the 200-300 range in terms of equity capital.

We appreciate this year's growth of the Bank's equity by 17% to RUB 922 million as a positive rating driver. Also, with a traditionally high equity capital adequacy ratio (21.2%), Bank VENETS, JSC is in a good position to further expand the scope of asset-size transactions.

The Bank operated at a profit in the first half of 2015. As of July 1, 2015, its return on assets (ROA) and return on equity (ROE) ratios reached 0.6% and 2.6%, respectively, exceeding the average levels in Russia's banking system.

The negative outlook on the rating reflects a reduction in corporate funding and the Bank's growing dependence on private clients' deposits.

Since the start of the year, the amount of corporate deposits, one of the sources of liabilities, decreased by 3% to RUB 799 million. Bank VENETS, JSC is basically expanding the funding base by borrowing from private clients (the population) whose deposits increased by more than 5 p.p., reaching ca. 72% of the credit institution's liabilities as of August 1, 2015.

We regard the continuing deterioration of the Bank's loan portfolio as a negative rating driver. The percentage of loan arrears at Bank VENETS, JSC is fairly high (10.2% from the loan portfolio). The share of problem and non-performing loans increased a bit to 9.6% of the total amount of loans receivable, which is substantially above the average level in the banking sector of Russia.

The poor loan book quality forced the Bank to increase provisions for possible loan losses. As a result, net interest incomes of the credit institution for 6 months of 2015 decreased by 9.7% against the first half of 2014 to RUB 73.5 million.

Official Bank name: Bank VENETS, JSC

Based on Promstroybank's operation department in 1990, Bank VENETS, JSC is currently the leading regional bank of Russia's Ulyanovsk region. The bank develops as a universal financial institution providing its clients with the whole range of standard banking services. Bank VENETS, JSC was registered by the Bank of Russia on October 19, 1990, reg. no. 524. The Bank possesses a license to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of December 19, 2014 and a license to accept ruble-denominated money deposits from individuals as of December 19, 2014. The Bank has been a member of Russia's deposit insurance system since October 14, 2004, DIS registration no. 77.

AK&M Rating Agency assigned a credit rating to Bank VENETS, JSC for the first time on November 18, 2010. The last rating action in relation to the Bank was taken on July 9, 2015. All rating action announcements are available on the akmrating.ru website.

The rating is valid until August 2016. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Bank's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the Bank. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

This press release is based on the Statement of assignment of a credit rating to Bank VENETS, JSC. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. August 14, 2015.

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.

CJSC AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

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