4 December 2013

S&P, in its press release published today, recognize improvements in MDM Bank's operating performance, the Bank's robust capital position ("bank's capital position provides a sufficient cushion against possible deterioration of asset quality") and solid funding base and, inter alia, note: "We expect the bank to gradually improve its results in 2013-14 on the back of new business and cost optimization measures introduced by its management." S&P's outlook revision is based upon ongoing concerns over the Bank's asset quality, the decrease in market share and deteriorating operating environment in Russia.

The Bank ranked #15 in Russia by retail deposits as at the end of Q3 2013 and, as recognized by S&P in its press release, has a strong presence in the markets of the Urals and Siberia. Nevertheless, S&P, inter alia, note that the Bank's status of "moderate systemic importance" (as per the agency's internal methodology) may be revised if the Bank's market share in customer deposits decreases. Based on preliminary analysis of the CBR's recently published draft criteria for assessing systemic importance, however, MDM comfortably qualifies as a "systemically important bank" (the CBR is expected to publish its list of systemically important financial institutions in early 2014).

The Bank's current strategy, as noted by S&P, "focuses on higher quality borrowers and sectors and lower risk, rather than aggressive growth at any cost. It also emphasizes cost control and growth of fee and commission revenues to reduce earnings volatility."

"We believe that the current difficult operating environment fully vindicates our conservative approach and will continue to focus on risk management, asset quality and profitability over aggressive growth." commented CFO Tina Kukka. "The material improvement in our operating income and bottom line over the past 12 months confirms that the Bank is firmly on the right track."

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