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Moody's upgrades financial strength rating of Erste Bank Hungary

The international credit rating agency Moody's Investors Service said it upgraded the bank financial strength rating (FSR) of Erste Bank Hungary to D+ from D on Tuesday. The outlook on the BFSR is now stable following the upgrade.

The rating action does not affect the A2/P-1 foreign currency deposit ratings of the bank, both of which have been affirmed with stable outlook. The bank is 99.9% owned by Erste bank AG (rated A1/P-1/C+) whose expected support underpins EBH's foreign currency bank deposit ratings. The statement released by the ratings agency said that the upgrade concludes the review for possible upgrade initiated on 4 July 2006. The rating review has focused on assessing the sustainability of the bank's recent achievements as well as on the vulnerability of the bank to foreign currency risk in light of importance of the bank's foreign currency lending and the recent depreciation of the Hungarian forint. A moderate weakening of the Hungarian forint and a moderate increase in Swiss franc interest rates should not lead to a material deterioration in the bank's financial fundamentals, Moody's said. The rating agency added that the bank's business and financial performance so far this year have been in line with its expectations and the bank's own forecasts. Moody's noted the good progress of the bank since the merger of Postabank into Erste Bank Hungary in September 2004. The two businesses have been successfully integrated, resulting in significant cost and revenue synergies for EBH. The bank has strengthened its retail franchise and secured its position as the third largest retail bank in Hungary by market share and improved its financial fundamentals by significantly increasing operating revenues and containing costs in 2005. The EBH risk management systems have also been implemented throughout the Postabank network, Moody's noted. Erste Bank Hungary is Hungary's fifth largest bank by total assets. At the end of September 2006, it had unaudited consolidated IFRS total assets of Ft 1,685 billion (€ 6.5 billion) as against Ft 1,453 billion at the end of 2005. Consolidated IFRS net profit for the first nine months rose to Ft 16.7 billion from Ft 18.8 billion for 2005. (Mti-Eco)