Expert RA

Expert RA has affirmed the B++ rating to Bank Vologzhanin

August 5, 2008

The Expert RA rating agency has affirmed the B++ rating (acceptable creditworthiness) to Bank Vologzhanin (Vologda).

High level of own funds fostering dynamic business development constitutes good foundation for the Bank creditworthiness. The Bank totally satisfies the CB demands as to standard of capital adequacy Н1 (by 1.04.08 the Bank standard was 20.17%). Another positive feature: the Bank tends to develop leasing business characterized by lower risks comparing to classic crediting. The Bank status at the leasing market is quite stable (the 128-th in the ranking of the largest lessors, according to Expert RA); it shows consistent growth. Other positive factors: highly efficient main activity and excellent financial indicators; in 2007 asset and capital profitability by IAS was 7.38% and 36.84% accordingly.

The rating is limited by the Bank insufficient credit portfolio diversification for client segments and industrial branches. Credits to enterprises and individual entrepreneurs constitute 80% of the Bank loan debts, chiefly covering trade (60%), industry (14%) and agriculture (12%).

“The share of ten largest borrowers in portfolio and assets is pretty high and tends to grow (by 1.04.08 it was 53.2% and 38.9% accordingly), which is a cause for concern,” – says Mikhail Doronkin, Expert RA, department of ratings of financial institutions. Another restraint: high level of overdue payments for individuals, which may be attributed to aggressive retail development in 2006-2007. Presently the Bank tries to stabilize overdue debts in the retail credit portfolio by balancing individual credits. The Bank also suffers from poorly developed risk management and low diversification of fund sources.

Bank Vologzhanin is a universal credit-finance enterprise, known for its comprehensive servicing of population and Vologda area enterprises. The Bank was set in 1992. Main operations are in Vologda area with 7 additional offices. By 1.04.08 net assets by RAS amounted to 1.42 bln rubles (the 518-th among Russian banks, according to the Expert RA ranking), own capital – 292.0 mln rubles, profit before tax in 2007 – 79.0 mln rubles.