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Moody's assigns negative outlooks to KBC Bank & KBC Group's ratings; Absolut Bank's ratings and outlook affirmed

February 14, 2008 | Cbonds

IIB Bank and Ceskoslovenska Obchodni Banka's long-term local currency debt
and deposit ratings are also assigned negative outlooks.

Paris, February 14, 2008 -- Following the publication of KBC Group NV's
2007 annual results, Moody's changed the outlook on all KBC's ratings to
negative from stable. All Prime-1 ratings were unaffected and therefore
affirmed.

Negative outlooks were assigned to the following ratings:

KBC Group long-term debt and deposit ratings at Aa3

KBC Bank BFSR at B-

KBC Bank long-term debt and deposit ratings at Aa2

KBC Bank long-term subordinated debt ratings at Aa3

Moody's said that it performed a review of KBC's credit worthiness in
light of the continued difficult market conditions and in particular it
applied its own stress tests on the group's CDO portfolio. Following this
review and according to the results of its stress tests, Moody's
concluded that there was a strong likelihood that KBC's ratings could
come under pressure if the present market turmoil were to develop further
and specifically affect KBC's CDO portfolio.

Moody's noted that the bulk of the underlying assets in KBC's CDO
portfolio consist of Investment Grade corporate exposure, which account
for the marginal levels of impairments reported by KBC today. However,
Moody's considered the following elements when assigning a negative
outlook:

1- The main elements of risks in this CDO portfolio stem, at present,
from the underlying RMBS and structured finance CDOs; although relatively
limited in nominal terms, this exposure is experiencing significant
volatility in mark to market terms in relation to the subprime crisis.

2- Moody's stress test covers not only the RMBS and structured finance
CDO exposures, but also potential additional mark to market losses that
may be incurred by the CDOs with respect to their corporate exposure. The
corporate CDO market has demonstrated a lesser level of stress up to now.

3- Moody's stress test also covers KBC's risk exposure to the monoline
industry.

4- And finally, Moody's also applied its stress tests to the assets held
by Atomium, KBC's ABCP conduit.

Moody's will continue to monitor potential impairments in KBC's CDO
portfolio given the portfolio's sensitivity to developments on the RMBS,
structured finance CDO and corporate CDO markets.

Moody's acknowledges KBC's predominantly retail focus. Nonetheless, given
the current volatile market environment and KBC's history of acquisitions
in riskier countries, such as last year's acquisition of Absolut Bank in
Russia, Moody's will continue to assess the appropriateness of KBC's
capital adequacy going forward.

Importantly, Moody's said that it considers a minimum of 8% Tier 1 ratio
(on a Basle 1 basis) as appropriate for KBC Bank to remain within its
present rating category. The bank's capitalisation will continue to be a
key rating driver for the bank. If the Tier-1 ratio were to fall below
the 8% threshold for an extended period of time, the bank's ratings would
be under further negative pressure.

Consequently, Moody's also reviewed the ratings of KBC's subsidiaries and
affiliates. The outlook on the A1 long-term bank deposit and senior
unsecured ratings of IIB Bank, KBC's 100% owned Irish subsidiary, was
also changed to negative from stable. The A2 long-term subordinate and
junior subordinate ratings were also assigned negative outlooks. The C
bank financial strength rating was affirmed.

The outlook on the Aa2 long-term local currency deposit rating of
Ceskoslovenska Obchodni Banka (CSOB), KBC's 100% owned Czech subsidiary,
was changed to negative from stable. The C bank financial strength rating
was affirmed, as well as the A1 long-term foreign currency deposit rating
that carries a positive outlook.

The ratings of of KBC's other European subsidiaries and affiliates and
their respective outlooks were not affected by the rating action taken on
the parent bank, as the negative impact of the possible downgrade of
KBC's BFSR would be mitigated by Moody's assessment of the probability of
systemic support these banks benefit. As a consequence, ratings of the
following banks were affirmed:

- Absolut Bank (Russia), rated Baa3/P-3/D-

- K&H Bank (Hungary), rated Aa3/P-1/C-

-Kredyt Bank (Poland), rated A2/P-1/D

- Nova Ljubljanska banka (Slovenia), rated Aa3/P-1/C

Moody's took the following rating actions:

KBC Group NV

The following ratings were assigned negative outlooks:

- Aa3 LT Local Currency Senior Unsecured

- Aa3 LT Issuer Rating

KBC Bank NV

The following ratings were assigned negative outlooks:

- B- BFSR

- Aa2 LT Local and Foreign Currency Bank Deposits

- Aa3 LT Local Currency Subordinate

- A1 Backed LT Foreign Currency Junior Subordinate

KBC International Finance NV

The following ratings were assigned negative outlooks:

- Aa2 Backed LT Foreign Currency Senior Unsecured

- Aa3 Backed LT Foreign Currency Subordinate and Junior Subordinate

KBC Bank Funding Trust II

The following rating was assigned a negative outlook:

- A1 Backed LT Foreign Currency Preferred Stock

KBC Bank Funding Trust III

The following rating was assigned a negative outlook:

- A1 Backed LT Local Currency Preferred Stock

KBC Bank Funding Trust IV

The following rating was assigned a negative outlook:

- A1 Backed LT Foreign Currency Preferred Stock

KBC IFIMA N.V.

The following ratings were assigned negative outlooks:

- Aa2 LT Local Currency Senior Unsecured

- Aa2 Backed Local Currency and Foreign Currency Senior Unsecured

- Aa3 Backed Local Currency and Foreign Currency Subordinate

KBC Financial Products International Ltd

The following rating was assigned a negative outlook:

- Aa2 Backed LT Foreign Currency Senior Unsecured

KBC Financial Products International VI Ltd

The following rating was assigned a negative outlook:

- Aa2 Backed LT Foreign Currency Senior Unsecured

Absolut Bank (Russia)

The following ratings were affirmed with stable outlooks:

- D- BFSR

- Baa3 LT Global Local and Foreign Currency Bank Deposits

- Baa3 LT Foreign Currency Senior Unsecured

- Aaa.ru LT National Scale Rating

Ceskoslovenska Obchodni Banka (Czech Republic)

The following rating was affirmed, with a stable outlook:

- C BFSR

The following rating was affirmed, with a positive outlook

- A1 LT Foreign Currency Bank Deposits

The following rating was assigned a negative outlook:

- Aa2 LT Local Currency Bank Deposits

IIB Bank (Ireland)

The following rating was affirmed, with a stable outlook:

- C BFSR

The following ratings were assigned negative outlooks:

- A1 LT Bank Deposits

- A1 LT Local Currency Senior Unsecured

- A2 LT Local Currency Subordinate

- A2 LT Local Currency Junior Subordinate

IIB Capital (Ireland)

The following ratings were assigned negative outlooks:

- A1 Backed LT Local Currency Senior Unsecured

- A2 Backed LT Local Currency Subordinate

K&H Bank (Hungary)

The following ratings were affirmed with stable outlooks:

- C- BFSR

- Aa3 LT Local Currency Bank Deposits

- A2 LT Foreign Currency Bank Deposits

Kredyt Bank (Poland)

The following ratings were affirmed with stable outlooks:

- D BFSR

- A2 LT Local and Foreign Currency Bank Deposits

Nova Ljubljanska Banka (Slovenia)

The following ratings were affirmed with stable outlooks:

- C BFSR

- Aa3 LT Local and Foreign Currency Bank Deposits

- A1 LT Foreign Currency Subordinate

- A1 LT Foreign Currency Junior Subordinate

All Short-term debt and deposit ratings remain un-affected and are
therefore affirmed.

Based in Brussels, Belgium, KBC Group NV had total assets of -355.6
billion at year-end 2007 (2006: -325.4 billion) and net income group
share of -3.3 billion (2006: -3.4 billion). At year-end 2007, the Tier 1
ratio of KBC Group NV stood at 8.05% (under Basel I), down from 8.7% at
year-end 2006.

Company: Absolut Bank

Full company nameAbsolut Bank
Country of riskRussia
Country of registrationRussia
IndustryBanks

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