Press Releases / 15.06.2015

Press Release as of 15.06.2015

Commercial Bank «Investment union» Ltd

AK&M Rating Agency has affirmed the national scale credit rating of Commercial Bank Investment union Ltd (license no. 637) at 'B++', tier 2, with a stable outlook.

The 'B++' rating indicates that Commercial Bank Investment union Ltd qualifies as a sufficiently creditworthy borrower. The risk of a delay in meeting obligations is moderate, the full or partial debt restructuring risk is insignificant.

Commercial Bank Investment union Ltd qualifies as a medium-sized Russian credit institution in terms of the amount of business. The Bank is registered in Moscow. Apart from the HQ, the Bank's branch network comprises 3 branches, 9 satellite offices, 16 operational 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 Investment union Ltd ranks in the 300-400 range among the Russian banks in terms of asset size and equity capital, in the 200-300 range in terms of retained earnings.

The Bank's credit rating is supported by the well-balanced and improving assets and liabilities, the strong liquidity position and the low cost of borrowing.

The Bank's assets and liabilities are well-balanced and continue to improve. In the first quarter of 2015, assets increased by 3.2%, liabilities by 3.7%. The main constituent of assets is the Bank's loan portfolio, with an appreciable share of highly liquid assets (13.5%). The Bank's borrowings were alternatively dominated by retail and corporate deposits, their combined share as of April 1, 2015 being almost 90%.

Our review of the Bank's assets and liabilities in terms of maturity revealed their acceptable balance, which makes a positive impact on the Bank's liquidity. 61.5% of the assets and 63.1% of the liabilities mature in 91 days to 1 year or in over 1 year. The share of on-demand assets and one-day assets is almost 25%, the share of short-term liabilities being 20.4%. Therefore, the bank has a healthy liquidity position, the N2, N3, N4 ratios meet the Central Bank of Russia's applicable requirements with a generous margin.

The low cost of funding also contributes to the Bank's credit rating. Over the period under review, average cost of the Bank's borrowings did not exceed 7%. Our review of weighted average interest rates revealed a comfortable interest margin indicating that the Bank's interest policy in terms of lending and deposit operations is well-balanced.

At the same time, we regard the Bank's net income size and structure fluctuations, the heavy overdue debt, the worse capital quality ratio (Tier 2 to Tier 1 capital ratio) and the low N1.2 ratio as risk factors for the Bank.

In AK&M Rating Agency's view, the lack of stability in the size and structure of the Bank's net income flows is constraining the credit rating. In particular, the Bank's net incomes dropped by 20.7% in 2014 but soared by 67.3% year-on-year for the 3-month period in 2015. This instability was aggravated by structural changes: the share of net interest incomes (adjusted for reserves), previously the main source of net earnings, decreased to 16.8% in the first quarter of 2015 while miscellaneous incomes derived from the temporary financial backing provided by the Bank founders dominated the Bank's net earnings in these months.

The Bank's rating is also constrained by the heavy overdue debt in its loan portfolio. In 2014, debt arrears skyrocketed 11 times to 15.6%, an uncomfortably high percentage. Despite this year's decline in both relative and absolute terms in January-April 2015, the Bank's overdue debt is still 9.3%, twice the average level in Russia's banking system.

Another point of concern for the Bank is the worse capital quality ratio (Tier 2 to Tier 1 capital ratio). As of June 1, 2015, it stood at 109.1%, considerably above the percentage recommended by the Central Bank of Russia (30%). For the five-month period in 2015, the Bank's additional capital increased by 19.3% against a negative core capital trend (-0.8%). This weakness is also reflected in the low N1.2 ratio (6.17%, almost touching the minimum acceptable threshold of 6%).

Official Bank name: Commercial Bank Investment union Ltd

Commercial Bank Investment union Ltd has been operating in the market of banking services since 1990. The Bank of Russia assigned it registration number 637 as of October 30, 1990. The Bank possesses a license to provide banking services involving Russian rubles and foreign currencies (without accepting money deposits from individuals) as of October 16, 2003 and a license to accept ruble-denominated money deposits from individuals as of October 16, 2003. The Bank has been a member of the deposit insurance system since September 8, 2005, DIS registration no. 894.


The rating assignment is based on the Credit Rating Methodology for Banks and their Debt Instruments (AK&M Rating Agency, 2014).

This press release is based on the Statement of assignment of a credit rating to Commercial Bank Investment union Ltd.

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.


AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

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