S&P affirmed ZAO UniCredit Bank ratings and revised its outlook to Negative

/Standard & Poor's, Moscow, October 16, 08/ - Standard & Poor's Ratings Services said today that it had revised the outlook on ZAO UniCredit Bank (UniCredit Russia) to negative from stable. At the same time the 'BBB+' long-term and 'A-2' short-term counterparty credit ratings were affirmed. "The outlook revision reflects our growing concerns about the impact of the difficult operating environment in Russia, which could place downward pressure on the bank's stand-alone creditworthiness. In addition, there is a possibility of a lower level of parental support being factored into the rating than previously considered, due to the increasing level of macroeconomic stress in Central and Eastern Europe, which could restrict the capacity of UniCredit Russia's parent to provide strong support in the future." said Standard & Poor's credit analyst Elena Romanova. For a more in-depth analysis on the impact of the ongoing liquidity squeeze and stock market turbulence in Russia's banking sector, please see the article "Financial Turbulence Tests Resilience Of Russian Banks And State Support For Banking Sector," published on RatingsDirect on Sept. 22, 2008. We consider UniCredit Russia to be a strategically important subsidiary within the UniCredit SpA (UniCredit; A+/Negative/A-1) group and consider it likely that UniCredit will support the bank's expansion and render support in a stress scenario, for which we give a three-notch uplift to the stand-alone long-term rating on UniCredit Russia. The ratings currently reflect operational and financial support from UniCredito, as well as UniCredit Russia's sustained good commercial performance, solid positions in Russia's banking market, its healthy financial performance and stable revenue structure, limited risk appetite, and relatively advanced risk-management systems (which are increasingly integrated into group measures). The ratings are constrained by the still-risky operating environment and volatile financial markets in the Russian Federation (foreign currency BBB+/Stable/A-2; local currency A-/Stable/A-2), the bank's aggressive growth strategy, and remaining high single-party concentrations in its funding base. "The outlook is negative, reflecting the potential negative impact of the ongoing difficult operating environment in the Russian banking system and macro economic factors on the financial performance of UniCredit Russia," said Ms. Romanova. In particular, weaker asset quality and profitability could lead to a lowering of the bank's stand-alone creditworthiness. In addition, the continuing stress in global markets, and specifically the Central and Eastern Europe (CEE) region, may restrict the capacity of UniCredit to provide strong parental support. A sustainable economic stabilization in Russia, which would relieve future pressure on asset quality and UniCredit Russia's overall financial stand-alone creditworthiness, might lead us to revise the outlook to stable, provided that the UniCredit's support capacity is not restricted by macroeconomic stress in its other CEE operations. For more information: Elena Romanova, Moscow, 7 (495) 783-40-91 Elena_Romanova@standardandpoors.com John Gibling, London, 44 (207) 176-72-06 John_Gibling@standardandpoors.com [2008-10-17]