The 'B+' rating indicates that RITZ BANK LTD qualifies as a sufficiently creditworthy borrower. The full or partial debt restructuring risk is low. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. February 24, 2015.

RITZ BANK LTD is a small credit institution in terms of the amount of business. Headquartered in Moscow, the Bank has a branch network comprising three structural units in Moscow and Kaluga.

RITZ BANK LTD specializes in providing services to small and medium-sized businesses, offers various retail lending programs, provides a wide range of account opening and management services to its clients. The Bank is not a member of Russia's compulsory deposit insurance system and does not possess a license to accept money deposits from individuals. As of February 1, 2016, the bank was in the 600-700 range among Russian banks in terms of assets, in the 500-600 range in terms of equity capital and net profit.

The Bank's credit rating is essentially supported by relatively high capital adequacy ratios, low funding costs, high return ratios, and a considerable percentage of highly liquid assets.

In 2015, RITZ BANK LTD increased its capital by 12.6% to RUB 355.0 million. The key source of equity growth was the Bank's profit earned in the previous period. As a result, the rated Bank's N1.0 and N1.2 capital adequacy ratios exceeded 50% and 40%, respectively, indicating the Bank's fairly strong position to expand its asset-side and liability-side transactions.

We regard the Bank's low funding costs (no more than 2% owing to substantial balances of clients' current accounts) as a positive rating driver. The cheapness of borrowings produces an extremely favorable impact on the net interest spread (more than 13%), which enables the Bank to pursue highly effective lending policy, as evidenced by a 187.5% increase in its net interest income.

Amidst today's economic turbulence, support from beneficial owners is a notable positive signal. In 2015, the Bank received gratuitous financial aid which, combined with its net incomes from banking operations, resulted in a profit after tax of RUB 36.2 million. The Bank's return ratios are considerably above the average levels in Russia's banking market.

The share of highly liquid assets in the credit institution's asset structure is persistently high, never falling below 8.6% in 2015. The Bank's highly liquid assets are mainly composed of balances cash funds and their equivalents. This contributes substantially to the Bank's financial viability, given the pivotal role of customer deposits in total liabilities of the credit institution.

The Bank's credit rating is constrained by loan portfolio deterioration, low diversification of funding sources, substantial dependence on large clients.

We are concerned about a notable negative trend in the structure of loans receivable in 2015 resulting in an increase in the share of problem and non-performing loans by 11.2 and 2.3 p.p., respectively. The aggregate percentage of poor quality loans reached 18%, more than twice above the average level in Russia's banking sector.

Another negative factor is the Bank's imbalanced structure of funding almost absolutely (more than 95%) dominated by corporate deposits. The extremely low diversification implies borrowings risks and constrains the credit institution's ability to manage liquidity risks.

We also regard the high funding base concentration across major depositors as a rating constraint for the Bank. Throughout the whole year 2015, ten largest depositors constantly accounted for nearly 90% of the Bank's total funding, the share of one group of depositors on some reporting dates exceeding 80%.

Full Bank name: Company with Limited Liability «International Commercial Bank of Investment and Technology Development (Center)»

Short name: RITZ BANK LTD

RITZ BANK LTD has been operating in the market of banking services since 1994. The Bank of Russia assigned RITZ BANK LTD registration number 2677 as of February 10, 1994. The bank possesses a license for banking operations involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of September 22, 2015.

AK&M Rating Agency assigned a credit rating to RITZ BANK LTD for the first time on March 11, 2015. All rating action announcements are available on the akmrating.ru website.

The rating is valid until July 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 RITZ BANK LTD. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. February 24, 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. 

AK&M Rating Agency

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www.akmrating.ru

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