Press Releases / 23.09.2014

Press Release as of 23.09.2014

IC UFS Finance LLC

CJSC AK&M Rating Agency affirmed the national scale credit rating of IC UFS Finance LLC at 'A', tier 3, with a stable outlook.

The 'A' rating indicates that the investment company is highly creditworthy. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal.

IC UFS Finance LLC established in May 2008 (IC Arbat Finance LLC until September 25, 2009) is part of international group UFS Investment Company providing the whole range of services and investment solutions in the Russian and global financial markets. The company is a member of the National Association of Securities Market Participants (NAUFOR) and international NFO International Financiers Guild. The Company is licensed to provide professional dealer, brokerage, custody and securities management services (the licenses are non-expiring).

The rating of UFS Finance reflects the Company's acceptable financial viability, milder debt burden and business expansion. The rating is additionally supported by the traditionally strong liquidity position and the profit increase in the first quarter of 2014.

Since incorporation, UFS Finance's authorized capital has increased almost five times reaching the RUB 200 million mark. As a result, equity capital grew almost twice, which enhanced the Company's financial viability (equity to total assets ratio reaching 0.49 as of April 1, 2014 against 0.23 at the start of 2013). The essential equity capital increase enabled UFS Finance to improve quite a few other financial metrics. In particular, the share of debt in liabilities for the same period decreased from 89% to 51%, the debt to net asset ratio dropped 6 times to a mere 0.45x on April 1, 2014.

In 2013 and Q1 2014, UFS Finance continued to strengthen its already comfortable liquidity position. Absolute liquidity ratio increased from 101% to 142%, current liquidity ratio from 130% to 198%.

We appreciate the investment company's business expansion in 2013 as a positive rating driver. In particular, the amount of securities transactions increased by 21%, the clientele saw a substantial growth in the segments of brokerage and custody services (more than twice in both segments). Another positive signal is the several-fold growth of the Company's net profit performance (RUB 50.7 million for Q1 2014 against RUB 6.9 million for the whole year 2013), even though this is partly attributable to changes in UFS Finance's accounting policy.

However, the soaring risks arising from the sanctions (primarily those applying to economy sectors) imposed on Russia by the USA, the EU and other foreign countries are one of the key constraints on the Company's rating. The higher risk may put heavy pressure on the business of UFS Finance which has mostly processed foreign financial instruments (Eurobonds of Russian issuers) in recent times. At the same time, we appreciate the Company's substantial business expansion in the segment of local financial instruments (including equity securities) to hedge against the above-mentioned risks as an offsetting factor.

Besides, AK&M Rating Agency notes a reduction in the Company's equity capital in 2014, although its current level still meets, with a good margin, the applicable capital adequacy requirements for both professional securities traders and companies managing resources of investment and non-state pension funds. The Company's rating is additionally constrained by the neutrality of the customer base in the discretionary asset management segment (no growth or contraction), an evidence of investors' gravitating towards the company's mutual funds achieving high yields in 2013.

This press release is based on the Statement of assignment of a credit rating to IC UFS Finance LLC.

The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company'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.

CJSC Analysis, Consulting and Marketing 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.


CJSC AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

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