The lower sub-level reflects negative changes in a number of ratios, a higher share of overdue loans, unprofitable operations.

In 2016, Bank Solidarity's capital adequacy ratio has been on a generally downward trend. As a result, the CAR ratio approached the 10% mark permanently staying almost 2 p.p. below the average percentage in the banking sector of Russia.

While still meeting the applicable statutory requirements, the acid test and current liquidity ratios decreased substantially. Compared with the start of the year, the N2 and N3 ratios decreased more than twice being far below the average levels in Russia's banking sector as of September 1, 2016.

The Bank's financial performance has obviously weakened this year. Earning a profit in the first quarter, the Bank generated losses in the following two quarters. The total loss for the 8-month period in 2016 was almost RUB 64 million, while the 8-month result in 2015 was positive.

Besides, the share of overdue loans increased considerably. Despite an overall loan portfolio expansion, the percentage of overdue loans increased 10 times this year reaching 3.6%. The lower level of provisions (2.7%) can be regarded as a risk factor.

Despite this growth, however, the percentage of loan arrears is still appreciably below the average level in Russia's banking sector. The solid growth of key balance sheet performance indicators also makes a favorable impression: this year, the Bank's assets and liabilities increased by 8% and 9%, respectively.

AK&M Rating Agency assigned a credit rating to Bank Solidarnost for the first time on February 18, 2010. The last rating action in relation to the Bank was taken on December 28, 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 Bank Solidarnost 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.

AK&M Rating Agency

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