Press Releases / 28.07.2015

Press Release as of 28.07.2015

Commercial Bank «OBRAZOVANIE»

AK&M Rating Agency has affirmed the national scale credit rating of Commercial Bank OBRAZOVANIE (license no. 1521) at 'A+', with a stable outlook.

The 'A+' rating indicates that CB OBRAZOVANIE qualifies as a highly creditworthy borrower. The risk of a failure to meet obligations in time is insignificant. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instrument rev. February 24, 2015.

Commercial Bank OBRAZOVANIE is a medium-sized Russian bank in terms of the amount of business. The Bank is currently active in 21 regions in 6 federal districts of the Russian Federation. Headquartered in Moscow, the Bank has 3 branches, 17 satellite offices and 4 stand-alone cash desks. The Bank provides all types of services involving Russian rubles and foreign currencies to legal entities and individuals. Commercial Bank OBRAZOVANIE ranks in the 100-200 range among Russian banks in terms of assets and equity capital.

The credit rating is essentially supported by the continuing growth of key balance sheet indicators, the net income improvements and the strong operating profitability.

Assets and liabilities of Commercial Bank OBRAZOVANIE are on a steady growth trend. The Bank's liabilities increased by 29% in 2014, by 15% in the first quarter of 2015. In both cases, the growth was driven by an increase in customer deposits. We appreciate the Bank's commitment to expanding the range of funding sources: its bonds included in the Central Bank Lombard List debuted in the market this May.

In the wake of a stronger funding base, the Bank's assets expanded by 32% in 2014, by 13% in the first quarter of 2015, the growth mainly resulting from an increase in net loans receivable, the main asset component.

Total net incomes earned by the Bank continues to increase at a fast pace (+98% in 2014, +67% in the first quarter of 2015), which has produced a positive effect on the Bank's profitability. Net profit of Commercial Bank OBRAZOVANIE for 2014 and Q1 2015 grew more than 4 times.

As a result, the Bank's return ratios increased considerably, now exceeding the average levels in Russia's banking sector. As of April 1, 2015, the Bank's return on equity (ROE) ratio was 33.7%, return on assets (ROA) ratio was 4.2% against 4.8% and 0.5% on average, respectively.

At the same time, we regard the structural instability of net incomes and the rated Bank's growing dependence on private deposits as rating constraints.

The structure of net incomes earned by Commercial Bank OBRAZOVANIE lacks stability, which puts certain pressure on the credit rating. In 2014, the Bank derived most of the income from foreign exchange transactions; in the opening quarter of 2015, the Bank's earnings were dominated by income from securities transactions, while foreign exchange transactions were loss making.

AK&M Rating Agency regards the high volatility of the corporate funding sources and the higher dependence on private deposits as another risk factor. At the time of our previous review (as of April 1, 2014) the absolute amount and relative shares of corporate and private deposits were equal; now the latter obviously outbalances the former. Over the period from April 1, 2014 to June 1, 2015, the amount of private deposits grew almost twice whereas borrowings from corporate clients increased by a mere 14.2%. That said, we saw strong monthly fluctuations in balances of legal entities' accounts (from RUB 8.8 billion to RUB 13.4 billion).


Full Bank name: Commercial Bank OBRAZOVANIE.

Commercial Bank OBRAZOVANIE has been operating in the market of banking services since 1991. Registration no. 1521 was assigned by the Bank of Russia on July 10, 1991. The Bank possesses a general banking license as of December 10, 2014 and a license for accepting deposits and placement of precious metals as of December 10, 2014. The Bank is a member of the compulsory deposit insurance system, registration certificate no. 939 as of November 28, 2005.


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 July 1, 2014. All rating action announcements are available on the 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 Commercial Bank OBRAZOVANIE. The rating assignment was based on the Credit Rating Methodology for Banks and their Debt Instrument 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. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.


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