The sub-level change and the outlook revision to negative reflect higher provisions, a substantial loss and a contraction in the credit institution's funding base.

The negative trend of growing provisions for possible loan losses persisted in the third quarter where loan provisions increased by more than RUB 3.5 billion, which caused substantial losses. As of October 1, 2016, the negative financial result of the credit institution reached RUB 1.6 billion. For the 9-month period in 2016, the Bank's equity capital decreased by RUB 1.9 billion (-27.3%), its capital adequacy ratio dropped to 9.6%.

We also note a contraction in the credit institution's funding base as evidenced by weaker corporate and retail lending performance.

At the same time, we note improvements in the main items of operating incomes. Besides, financing from the shareholders amounting to RUB 1.7 billion in the third quarter of 2016 is a stabilizing factor.

AK&M Rating Agency assigned a credit rating to Commercial Bank OBRAZOVANIE for the first time on October 9, 2009. The last rating action in relation to the Bank was taken on September 7, 2016. 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 Commercial Bank OBRAZOVANIE 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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www.akmrating.ru

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