Press Releases / 17.11.2016

Press Release as of 17.11.2016

Bank "Rublev"

AK&M Rating Agency has affirmed the national scale credit rating of Joint Stock Commercial Bank RUBLEV (license no. 3098) at 'A' sub-level 3, with a stable outlook.

The 'A' rating indicates that Bank RUBLEV qualifies as a highly creditworthy borrower. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instruments rev. February 25, 2016.

Headquartered in Moscow, the Bank operates a network in ten regions of Russia. The Bank provides the whole range of banking products and services involving Russian rubles and foreign currencies to legal entities and private customers.

Bank RUBLEV qualifies as a medium-sized bank of Moscow and Moscow region in terms of the amount of business. The credit institution's position in the Russian market of banking services can be regarded as stable. As of October 1, 2016, the Bank ranked in the 100-200 range of Russian banks in terms of assets and equity capital.

The Bank's credit rating is essentially supported by a growing and well-structured loan book, a reduction in overdue loans, sufficient provisions, a high share of interest, fee & commission incomes, and low concentration of liabilities across the groups of depositors.

At the end of the third quarter of 2016, Bank RUBLEV's loan portfolio reached RUB 11,384.4 million growing by 9.1% for the 12-month period ending on September 30. This, combined with growing efficiency of credit and deposit operations, produces a positive effect on the Bank's net interest income (which has stayed positive this year and RUB 52.2 million for the 9-month period) and, accordingly, its total income.

In the period under review, the percentage of poor-quality loans (loans of quality grades 4 and 5) decreased from 10.4% to 9.9%, as opposed to the general upward trend in Russia's banking sector, with the result that the share of problem and non-performing loans in the Bank's loan portfolio is comparable with that in the banking sector (9.9% vs. 9.8%, respectively). The reduction in the share of low-quality loans resulted from an overall improvement in the borrowers' financial capacity and more responsible servicing of their debts.

The loan debt servicing improvements reduced the percentage of overdue loans from 12.4% to 4.1% for 12 months. It should be noted that the share of loans with payment delays exceeding 30 days also decreased from 5.2% to 2.4%. As a whole, the percentage of loans with servicing problems is 1.4 times below the average level in the banking sector of Russia, which is a strong positive rating driver for the credit institution.

We appreciate Bank RUBLEV's rather conservative loan provisioning policy. As of October 1, 2016, the amount of overdue loans (RUB 505.5 million) was fully covered by provisions (RUB 872.8 million).

The interest income, fee & commission income form the backbone of Bank RUBLEV's net incomes. At the same time, transactions involving foreign currency and securities did not produce a substantial impact on the final financial result the volatility of which is therefore moderately curbed.

The Bank's credit rating is also supported by moderately low concentration of liabilities across the groups of depositors. As of October 1, 2016, the maximum percentage of liabilities attributable to one group of depositors did not exceed 5.3%, while ten largest depositors accounted for 8% of the total liabilities. As a whole, the concentration of liabilities has been stable in the last 12 months, which mitigates the risks of financial stability deterioration.

At the same time, a reduction in equity, a low share of highly liquid assets and low liquidity ratios are working against the Bank's rating.

One of the key rating constraints is the currently negative equity capital trend the credit institution faces. For the last 12 months, the Bank's equity capital shrank by 14.2% to RUB 2,015.6 million, with the result that its capital adequacy ratio (N1.0) decreased from 13.1% to 10.8%. This downturn weakens the Bank's ability to build up provisions if needed and to expand the scope of future asset-side transactions.

As of October 1, 2016, deposits of customers (both legal entities and individuals) accounted for more than 87% of the Bank's total liabilities. The retail segment is the main source of the Bank's funding base accounting for approximately 75% of its liabilities. With this in mind, the low share of highly liquid assets (5.5%) poses higher risks of financial destabilization under an adverse external scenario.

The Bank's rating is also constrained by underwhelming liquidity ratios (N2 and N3). While staying within regulatory limits, these ratios are notably below the average percentage in Russia's banking sector.

Full Bank name: Joint Stock Commercial Bank «RUBLEV»

Short name: Bank RUBLEV

Joint Stock Commercial Bank RUBLEV has been operating in the market of banking services since 1994. The Bank was registered by the Bank of Russia under no. 3098 as of September 22, 1994. The Bank possesses a license for banking services to individuals and legal entities involving Russian rubles and foreign currencies as of March 4, 2015. The Bank has been participating in Russia's compulsory deposit insurance system (DIS) since August 4, 2005, DIS registration no. 847.

AK&M Rating Agency assigned a credit rating to Bank RUBLEV for the first time on January 11, 2011. The last rating action in relation to the Bank was taken on October 22, 2015. All rating action announcements are available on the website.

The rating is valid until November 2017. 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 Company. 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 Bank RUBLEV.

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

Ul. Gubkina 3, Moscow, Russia

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