S&P affirms ratings of EDB, outlook remains stable

/Standard & Poor's, London, August 18, 10, heading by KASE/ - Standard & Poor's Ratings Services said today that it affirmed its 'BBB' long-term and 'A-3' short-term foreign currency issuer credit ratings on Kazakhstan-based Supranational Eurasian Development Bank (EDB). The outlook remains stable. We also affirmed the Kazakh and Russian national scale ratings at 'kzAA+' and ruAAA', respectively. "The affirmation reflects our view of the bank's strong shareholder support, as evidenced by its high capitalization levels and its clearly defined role as a regional multilateral development finance institution," said Standard & Poor's credit analyst Frank Gill. EDB's untested track record in lending activities and loan portfolio concentration in what we consider to be an economically volatile region remain constraining factors in our view. The ratings on EDB remain linked to those on its dominant shareholder, the Russian Federation (Russia, foreign currency rating BBB/Stable/A-3). We consider EDB's capital position as strong, mitigating the risks arising from the difficult operating environment in its countries of operation. The Russian Federation and the Republic of Kazakhstan paid in $695 million of a scheduled capital increase in 2008, raising paid-in capital to $1.5 billion. At the end of July 2010, Russia owned just under two-thirds of EDB's share capital and Kazakhstan, where the bank is headquartered, just under one-third. Total equity equaled 65% of total assets at end June, 2010. Moreover, the strength of EDB's public policy role was evidenced by the Republics of Armenia, Tajikistan, and Belarus joining the bank shareholder membership. All three, however, are paying in small amounts of capital compared with the amounts paid in by the two dominating founding shareholders. The stable outlook reflects that on the Russian Federation and the Republic of Kazakhstan. The ratings could improve or deteriorate as a result of changes to the ratings on EDB's two principal shareholders, or should the concentration risk in the EDB's balance sheet decline. Conversely, if EDB were to leverage its balance sheet up more significantly from currently low levels, and if asset quality were to deteriorate, the ratings could be lowered. For details please contact: Franklin Gill, London, 44 (207) 176-71-29 Luke Marshall, London, 44 (207) 176-71-11 Analysts: frank_gill@standardandpoors.com luc_marchand@standardandpoors.com sovereignlondon@standardandpoors.com [2010-08-19]