The 'A' rating indicates that JSCB Primorye qualifies as a highly reliable borrower. Risk of a delay in meeting liabilities is relatively low, restructuring risk for a loan / part of a loan is minimal.

We regard the high quality and growth of the Bank's equity capital, profitable operations, low percentage of arrears in the loan portfolio, commitment to raising funds from individuals, low funding costs, and fairly low concentration of liabilities as essential positive rating drivers for JSCB Primorye.

The Bank has constantly been increasing its equity capital since 2008 (by RUB 144 million / 6% in 2012, by RUB 201.6 million / 8% for eight months 2013), reaching RUB 2.7 billion as of September 1, 2013. Its net worth was enough to deliver lending products to large-scale enterprises and finance long-term projects.

As of September 1, 2013, the Bank's capital quality ratio (Tier 2 to Tier 1 capital ratio) was 25.2%.

The Bank's operations are profitable. In particular, JSCB Primorye earned RUB 382.5 million in net profit in 2012, RUB 155.9 million for the first six months of this year.

Another argument in favor of the high credit rating is the low share of arrears in the Bank's loan book. The loan arrears accounted for 1.9% of the loan portfolio, almost twice below the average percentage in Russia's banking sector.

We regard the concentration of the Bank's liabilities as comfortably low. As of September 1, 2013, the maximum share of liabilities attributable to one group of lenders was 12.26%, while 10 principal lenders accounted for 24.52% of the total liabilities.

The Bank's rating is also supported by the growing number of personal customers in 2012 and early 2013 (by 91%, reaching 58.6 thousand, their combined deposits growing by RUB 5.3 billion.

The low funding costs are also contributing to the Bank's credit rating. At the end of the first half of 2013, the cost of debt was 2.74% p.a., the interest rate on customer deposits was 3.32% p.a. against the Central Bank of Russia's refinancing rate of 8.25%.

At the same time, a reduction in assets and liabilities, shrinking balance sheet profit and net profit in 2012 and this year, and lower return ratios are working against the credit rating of JSCB Primorye.

One of the negative rating drivers is that the Bank's assets and liabilities, while staying high, decreased by RUB 1.6 billion and RUB 2.0 billion, respectively, in 2012 and the first half of 2013. We tend to attribute this decline to the general economic situation in the region. The outflow of large legal entities' deposits was successfully offset by the arrival of new clients, mainly individuals, with an ensuing increase in the Bank's assets and liabilities in the second quarter.

Another risk factor for the Bank is its weaker profit performance. In 2012, its balance sheet profit and net profit dropped twice (on average) against the previous year. It should be noted that the Bank's net interest margin in 2012 was comparable to that in 2011.

The lower ROE and ROA ratios are putting additional pressure on the rating of JSCB Primorye. As of July 1, 2013, they reached 8.22% and 0.89%, respectively.

Acting with due diligence, the Bank is in a good position to preserve its credit standing and to meet all its customer commitments, despite the slightly weaker performance.

Full name: joint-stock commercial bank Primorye.

Short name: JSCB Primorye.

The Bank has been operating in the market of banking services since 1994. In 2012, the Bank secured a new general banking license (no. 3001); in November 2004, the Banking Supervision Committee of the Central Bank permitted JSCB Primorye to join the Deposit Insurance System (DIS). The Bank's auditor was CJSC BDO.

The Bank qualifies as a mid-sized Russian credit institution in terms of the amount of business. As of July 1, 2013, the Bank ranked 158th among Russian banking institutions in the amount of net assets (RUB 23.3 billion), 163rd in the equity capital as of the same date (RUB 2.7 billion).

The Bank's core business is the provision of all types of banking products and services involving Russian rubles and foreign currencies, along with operations in the market of precious metals and securities.

This press release is based on the statement of assigning a credit rating to JSCB Primorye.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Bank's credit standing and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities to the Bank.

AK&M Rating Agency will not incur any responsibility 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 is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).

AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Regulation 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide cash and settlement services to project and engineering companies implementing investment projects), the MICEX (for the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation and bond listing purposes). By a resolution of Russia's Government AK&M Ratings count for the recapitalization of banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.

CJSC AK&M Rating Agency
ul. Gubkina 3
Moscow, Russia
www.akmrating.ru
Press release by: S.V. Avdoshin
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.
Email: asv@akm.ru