The 'A+' rating indicates that JSC Agency for Supporting Small and Medium-sized Businesses, regional microfinance institution of Leningrad region / ASSMB (previously OJSC Credit Guarantee Agency / CGA) is a highly reliable guarantee institution. The risk of a failure to meet obligations in time is insignificant. The rating assignment was based on the Credit Rating Methodology for Guarantee Institutions rev. March 3, 2015.

The credit rating is essentially supported by the Agency's growing key performance indicators, fairly conservative approach to sharing credit risks with partners, profitable operations, and a robust guarantee coverage.

For the 9-month period in 2015, the Agency provided sureties for a total amount of RUB 163.1 million securing loans for a total amount of RUB 371.7 million provided by partner banks, exceeding the full year 2014 performance. That said, the Agency sticks to a conservative policy of sharing risks with partners and maintains a satisfactory level of solvency across the portfolio of borrowers. The actual share of loans secured by the guarantee institution reaches approximately 44%.

The higher amount of sureties has pushed up the guarantee institution's fees to RUB 5.6 million, three times above the result achieved for the same period in 2014. Besides, earnings from money accounts and deposits with credit institutions increased by 28.0%. As a result, ASSMB's net profit increased by 18.1%.

As a result of ASSMB's steadily profitable operations and backing from the founders, its equity capital stays on the rise. For the 9-month period in 2015, the Agency's equity capital increased by 19.7% resulting from the follow-on offering of common shares and higher retained earnings.

The sufficiently reliable guarantee coverage of the Agency's obligations on the sureties provided by it also contributes to the rating. Following open competitions, the money funds were placed on deposit accounts with 4 Russian banks being among the top 20 leaders of Russia's banking sector as of November 2015 in terms of asset size and rated similar to the 'A' to 'A++' range on the AK&M Rating Scale. The maximum relative share of one bank in total deposits is 29.6%, which is below the threshold set by the regulatory authority.

At the same time, AK&M experts regard the growing concentration of balance sheet liabilities on larger sureties and an increase in the amount of payment obligations discharged as the risk factors constraining the rating.

The relative share of sureties amounting to over RUB 5 million has increased by 10 p.p. since our previous review to 70% of the total amount of obligations. The average amount of surety provided by the Agency in 2015 has been RUB 4.4 million against RUB 2.8 million in 2014. The growing concentration on larger sureties, and accordingly, the higher average size of surety implies higher risks, which constrains the guarantee institution's rating.

The growing amount of payment obligations discharged by the Agency in relation to the sureties provided by it combined with low efficiency in recovering money through applicable recourse procedures exerts certain pressure on the rating. For the 9-month period in 2015, the guarantee institution effected 5 payments for a total amount of RUB 14.7 million. As a result, the total amount of obligations to banks discharged by the Agency has doubled since our previous review reaching RUB 30.9 million. So far, the Agency has recovered RUB 4.033 million through applicable recourse procedures including a mere RUB 6.8 thousand this year. It should however be noted that the Agency's loss ratio, while increasing, remains acceptable (2%).

Full name: JSC Agency for Supporting Small and Medium-sized Businesses, regional microfinance institution of Leningrad region

Short name: ASSMB

JSC Agency for Supporting Small and Medium-sized Businesses, regional microfinance institution of Leningrad region was registered on August 14, 2003. Its sole founder is the government of Leningrad region represented by the Leningrad regional state property management committee. For the whole period of activity, the guarantee institution has concluded 562 surety agreements for a total amount of RUB 1.3 billion. As a result, small and medium-sized businesses took out loans for a total amount of RUB 2.9 billion. As of October 1, 2015, ASSMB's surety portfolio amounted to RUB 333.7 million, the company's equity capital was RUB 395.0 million.

AK&M Rating Agency assigned a credit rating to ASSMB for the first time on December 18, 2012. The last rating action in relation to the Agency was taken on December 26, 2014. All rating action announcements are available on the akmrating.ru website.

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

For estimation purposes, we completely rely on the reliability of information provided by the guarantee institution. 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 JSC ASSMB and the Credit Rating Methodology for Guarantee Institutions rev. March 3, 2015.

The rating, along with any information and conclusions provided in this report, only conveys our opinion and shall not be construed as a recommendation to lend money resources to the Fund or to seek its guarantees and sureties.

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.

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www.akmrating.ru

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