Press Releases / 25.01.2016

Press Release as of 25.01.2016

National Entrepreneurship Support Fund of the Kaluga region

AK&M Rating Agency affirmed to the national scale guarantee institution rating of State Business Support Fund of Kaluga region at 'A', sub-level 3, with a stable outlook.

The 'A' rating indicates that the State Business Support Fund of Kaluga region qualifies as a guarantee institution with a high degree of financial stability. The full or partial default risk is low. The rating assignment was based on the Credit Rating Methodology for Guarantee Institutions rev. March 3, 2015.

The State Business Support Fund of Kaluga region was established in 1995 by the Kaluga territorial department of Russia's State Antimonopoly Policy Committee to finance the development of business, competition and restriction of monopolies. The Fund undertook the first surety commitment in 2009.

The rating is essentially supported by the guarantee institution's growing equity, profitable operations, high reliability of the guarantee coverage as well as a favorable sectoral structure of the surety portfolio.

In the 4th quarter of 2014, the government of Kaluga region contributed property amounting to RUB 280 million to the guarantee institution's capital for the purpose of implementing the Russian Government's "Development of Business and Innovations in Kaluga Region" program. The contribution pushed up the Fund's capitalization more than twice. 2015 brought further improvements in the guarantee capital which increased by approximately RUB 800,000 on account of the Fund's net earnings.

Consolidated profit of the State Business Support Fund of Kaluga region for the 9-month period in 2015 was RUB 22.6 million increasing 3.6 times year-on-year. The growth was driven by a commensurate increase in the Fund's income from financial investments. As a result, return on consolidated assets also increased reaching a fairly high level of 5% on an annualized basis as of October 1, 2015.

The State Business Support Fund of Kaluga region has a healthy portfolio of financial investments. As of January 1, 2016, the guarantee capital was placed with three state-owned banks. These credit institutions are among the top 10 leaders of Russia's banking market in terms of asset size, their credit ratings corresponding to the 'A++' level on the AK&M National Rating Scale.

SME businesses engaged in the agricultural sector and light industry hold significant positions among the borrowers with existing guarantees provided by the Fund (37% and 36%, respectively). In the past year, the share of agricultural producers receiving sureties from the State Business Support Fund of Kaluga region increased by more than 30% as the Fund financed development of small and medium-sized businesses in the sectors prioritized in the region. Therefore, the guarantee Fund fulfils its function of providing assistance to existing businesses contributing to investment projects in Kaluga region.

The Fund's rating is constrained by a decline in the amount of sureties, a low guarantee capital multiple and a higher loss ratio.

The amount of the sureties provided by the Fund in 2015 decreased by 39% to RUB 43 million. This caused a contraction in the shrinking portfolio of surety commitments, the amount of guarantees in relation to the borrowers decreasing by almost 14%.

Coupled with a substantial increase in the Fund's guarantee capital at the end of 2014, these negative effects resulted in a worse guarantee capital multiple as of January 1, 2016. The current percentage of 40% indicates low efficiency in using targeted funds for providing access of SME businesses to lending restriction of banks. Less than half of the total amount of budget provisions was used as intended on account of a substantial decline in lending to SME businesses by partner banks and stricter risk management-related requirements to clients applying for guarantees from the Fund.

In 2015 the guarantee institution discharged 3 payment obligations exceeding RUB 34 million to partner banks (70% of the total amount of payments under surety agreements). As a result, the Fund's balanced loss ratio (the ratio of payments to total guarantees, adjusted for recoveries) increased by 5 p.p. to 7%. Nevertheless, this percentage still meets the Ministry of Economic Development's recommendations seeing as the maximum acceptable loss threshold for funds is set equal to 14% as of December 1, 2015 (the share of loan arrears to total loan debt in the SME segment according to the Central Bank of Russia's statistics).


Full name: State Business Support Fund of Kaluga region.

The Fund has been providing sureties since 1995. To date, the guarantee institution has concluded 156 surety agreements for a total amount of more than RUB 600 million, which enabled small and medium-sized businesses to take out RUB 1.4 billion in loans. As of January 1, 2016, the guarantee institution's surety portfolio amounted to RUB 218.3 million.

AK&M Rating Agency assigned a guarantee institution reliability rating to State Business Support Fund of Kaluga region for the first time on January 27, 2014. All rating action announcements are available on the website.

The rating is valid until January 2017. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Fund's creditworthiness are revealed.

This press release is based on the Statement of assignment of a guarantee institution reliability rating to State Business Support Fund of Kaluga region 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.


AK&M Rating Agency

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