The rating downgrade reflects a deterioration in the Bank's financial position for the 5-month period in 2016.

Since March 2016, AK&M Rating Agency has seen a notable deterioration in the loan portfolio quality: arrears on the retail and corporate loans provided by the Bank increased from RUB 870 million to RUB 2,673 million. As a result, as of June 1, 2016, the share of overdue debt in the loan portfolio of JSCB Primorye reached 25.6%.

We also note that the additional provisions made by the Bank impaired its financial result: the Bank's loss for the 5-month period in 2016 was RUB 66 million.

That said, we appreciate a comfortable liquidity position and the Bank's ability to meet applicable statutory ratios with a wide margin, according to the regulatory authority's requirements. The high coverage of credit risks by reserves also supports the rating.

AK&M Rating Agency assigned a credit rating to JSCB Primorye for the first time on Novermber 24, 2011. The last rating action in relation to the Bank was taken on October 26, 2015. All rating action announcements are available on the akmrating.ru website.

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 monitoring results of the current credit rating assigned to JSCB Primorye and the Credit Rating Methodology for Banks and their Debt Instruments rev. February 25, 2016.

The rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion 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

Ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

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