Standard & Poor’s Ratings Services changed outlook on Bank Vozrozhdenie Long-Term Credit Rating (“B+”) from “stable” to “positive”

26 October 2010

Standard & Poor’s Ratings Services revised its outlook on Bank Vozrozhdenie long-term counterparty credit rating to “positive” from “stable”. The “B+/B” counterparty credit ratings and “ruA+” Russia national scale ratings were affirmed.

“Now it’s clear for the banking community that despite difficult operating environment in the sector the low point of the crisis cycle is behind for the major part of the banking system. Rating action of the Standard & Poor’s Ratings Services confirms this view as well. Over the crisis asset quality deterioration was the key factor that affected credit ratings in the banking system. Now this trend has changed — Vbank’s asset quality has stabilized, while RUB 11 bln. of loan loss provisions fully cover non-performing loans. Furthermore we have managed to maintain all the key advantages of the bank — conservative balance sheet and reasonable approach to risk management. We are pleased that our traditional strengths such as resilient funding base, high liquidity profile and capital adequacy were mentioned in the press-release of the rating agency” — commented Andrey Shalimov, member of the Management Board and the Head of Treasury.

The outlook revision reflects higher-than-expected resilience of the bank to the difficult operational environment. Conservative approach to risk management and diversified funding base with limited reliance on wholesale markets are traditional features of the bank. The outlook upgrade also resulted from below-sector-average single-name concentrations in its loan book. In the press-release the agency analysts underlined their expectations that “asset quality should stabilize in the near term, while liquidity and capitalization should remain adequate”.

Positive rating action can be considered if asset quality were to improve and profitability to show an adequate resilience while funding, liquidity and capitalization would remain adequate.

Bank Vozrozhdenie will publish its 9M 2010 RAS report on October 27
Bank Vozrozhdenie net profit for Q3 2010 increased 1.6 times q-o-q. Net profit for 9M 2010 amounted to RUB 405 mln