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Moody’s Interfax Rating Agency upgrades Credit Bank of Moscow to A3 (rus)

14.10.2004

MOSCOW. Oct 14 (Interfax) — Moody’s Interfax Rating Agency has upgraded the long-term national scale credit rating of Credit Bank of Moscow from Baa1 (rus) to A3 (rus) and affirmed the short-term rating at RUS-2.

The rating upgrade reflects the bank’s stronger market positions in medium and small business financing, combined with its firm and developing key niche of servicing retail chains in the Moscow region, the increased diversification of the bank’s business, and the considerable financial flexibility demonstrated during the crisis in Russia’s banking system in June-July 2004.

The rating is determined by the bank’s stable, profitable niche on the banking market in the Moscow region, relatively low level of risk per borrower and group of largest borrowers, good compatibility of assets and liabilities by duration, the high liquidity of its loan portfolio, high capitalization and loan loss provisions, and strong management.

The rating is constrained by strong competition on the Moscow market from other banks and the comparatively heavy industry concentration of the bank’s loan portfolio. The high concentration of the bank’s resource base in retail deposits in the Moscow region increases its vulnerability to depositor panic.

CBM serves primarily small and medium enterprises in the Moscow region. A substantial portion of the bank’s client base consists of Moscow wholesale and retail companies, including many leading retail chains. Another major business for the bank is automobile financing. CBM has one of the most developed automobile credit sales networks in Moscow, based on collaboration with leading car dealers and show rooms.

The bank faces stiff competition from other banks on the Moscow market. CBM’s market share is small, but it continues to maintain competitive advantages related to servicing retail chains and is successfully increasing its portfolio of automobile loans. With the planned expansion into other market segments and regions, the competitive pressure on the bank will increase.

The bank has an effective credit risk management system that takes into account the particulars of customers’ business. The broad customer base in the retail sector provides a low level of risk both per borrower and group of largest borrowers. Having a profitable and good quality loan portfolio, the bank makes large provisions that more than offset credit risks. Another factor in the bank’s reliability is its high capitalization.

The bank’s assets and liabilities match by term is high in a stable environment, and during the crisis in July 2004 CBM demonstrated high financial flexibility, based on the high liquidity of its loan portfolio, and professionalism in managing risks.

The A3 (rus) long term rating on the Moody’s Interfax Rating Agency national scale signifies a high level of creditworthiness compared to other borrowers/debt, but one that could deteriorate amid negative external conditions.

The short-term RUS-2 rating on the Moody’s Interfax Rating Agency national scale signifies high level of creditworthiness compared to other Russian borrowers/debt.

Moody’s Interfax Rating Agency specialises in credit risk analysis in Russia. Leading international rating agency, Moody’s Investors Service, bought a stake in the Interfax Rating Agency in November 2003 and, in June 2004 increased its interest to controlling. The Interfax international information group — the leading provider of political and business information from the emerging markets of Europe and Asia, is the other shareholder in Moody’s Interfax Rating Agency.