OREANDA-NEWS. November 19, 2007. On 19 November 2007 Fitch Ratings upgraded LOCKO-Bank Long-term Issuer Default rating ("IDR") to 'B' from 'B-' (B minus) and its National Long-term rating to BBB-(rus) from BB+(rus). The Outlooks for the Long-term IDR and National Long-term ratings are Stable.

At the same time Fitch affirmed LOCKO-Bank’s other ratings at Short-term IDR 'B', Individual 'D', Support '5' and Support Rating Floor 'No Floor'.

According to Fitch experts the upgrade reflects the stable growth of the bank’s franchise, which has not compromised its good asset quality, consistent reduction of borrower concentration levels, as the bank follows its SME diversification strategy, its reasonable capitalisation and adequate liquidity, which is supported by improved diversification of funding sources. Ratings also take into account only modest refinancing requirements with respect to wholesale borrowings in the near-term.

LOCKO-Bank’s ratings also take into consideration improved core earnings in 9M07, driven by a notable decrease in the cost/assets ratio and a sustained higher loans/assets ratio. However, Fitch notes some acceleration of expenses growth toward the end of the year, mainly due to increased interest expense associated with two Eurobond issues placed since the beginning of the year and an expansion-driven increase of operating costs.

According to the Deputy Chairman of the Executive Board of LOCKO-Bank Mr. Mikhail Pavlov the upgrade of the Bank’s ratings in an unfavorable current market situation reflects the continued successful realization of the Bank’s strategy and a high level of risk management.

LOCKO-Bank’s 9m2007 performance highlights
assets grew by almost 52% from the beginning of the year making Rb25.2bn
loan portfolio (net of LLR) grew by almost 57% to Rb19.2bn
share of SME loans grew by 94% compared with year-end 2006 making over 40% of total loan portfolio
shareholders’ equity grew by 34% (from Rb2.5bn to Rb3.3bn) for the most part for the account of Rb600m issue of additional shares in the end of September, which were proportionally acquired by shareholders and beneficial owners including International Finance Corporation (IFC) and Swedish investment fund East Capital
net income for 9m2007 made Rb230m against Rb150m for the same period in 2006.