Moody's takes rating actions on three Romanian commercial banks

By Moody's Investors Service Cyprus Limited

Limassol, November 26, 2009 -- Moody's Investors Service has today
downgraded the ratings of three Romanian commercial banks in light of its
global review of systemic support indicators for the country's banking
system, and also because of the asset quality challenges faced by
Romanian banks in the currently difficult operating environment. The
ratings of the affected banks are as follows:

i) Banca Comerciala Romana SA (Erste Group)

- Bank financial strength rating (BFSR) of D remains unchanged with
stable outlook.

- Global local currency (GLC) deposit ratings downgraded to Baa2/P-2 with
a stable outlook from Baa1/P-2.

- Foreign currency (FC) deposit ratings of Baa3/P-3 remain unchanged with
stable outlook.

ii) BRD -- Groupe Societe Generale

- BFSR of D+ (which maps to a Ba1 baseline credit assessment) downgraded
to D with stable outlook.

- GLC deposit ratings downgraded to Baa2/P-2 with a stable outlook from
A2/P-1.

- FC deposit ratings of Baa3/P-3 remain unchanged with stable outlook.

iii) Raiffeisen Bank SA

- BFSR of D remains unchanged with stable outlook.

- GLC deposit ratings downgraded to Baa3/P-3 with stable outlook from
Baa2/P-2.

- FC deposit ratings of Baa3/P-3 remain unchanged with stable outlook.

Earlier this year, Moody's published a Special Comment on its review of
the capacity of governments and central banks to support their banking
systems, entitled "Financial Crisis More Closely Aligns Bank Credit Risk
and Government Ratings in Non-Aaa Countries", available on moody.com.

Consistent with the analytical criteria specified in the Special Comment,
and given Romania's current situation and future prospects, Moody's has
changed the systemic support input for Romanian banks' ratings to Baa2
from the Aa3 local currency deposit ceiling (LCDC). The new Baa2 systemic
support anchor for Romanian banks is placed one notch above the Baa3
local currency government debt rating. As a result of this, the local
currency deposit ratings of Romanian banks have been downgraded,
affecting each bank differently.

In the Special Comment, Moody's noted that the appropriate reference
rating for the capacity of a national government to provide support to
banks during a prolonged and widespread crisis would be aligned with or
constrained by the government's own debt rating. However, Moody's also
believes that this rating could be adjusted, usually positively, to
reflect the non-fiscally dependent measures that many central banks and
governments can deploy to support banks.

In deciding whether the systemic support anchor can be higher than the
local-currency debt rating of the national government, Moody's
considered a number of factors for each banking system. These are: the
size of the banking sector relative to the government's resources; the
level of stress in the banking system and in the economy; the FC
obligations of the banking system relative to the government's own FC
resources; political and historical patterns; and the possibility of any
drastic shift in government priorities.

Moody's regards the systemic importance of the Romanian banking system as
moderate given the ratio of banking assets to GDP of around 63%, with a
weighted average bank financial strength rating (BFSR) of D for the rated
Romanian commercial banks. The level of stress in the Romanian banking
system has increased due to the deep recession in the country, with the
proportion of non-performing loans (NPLs) growing steeply in recent
quarters, reaching around 13.4% as of August 2009 based on local
standards (loans classified as doubtful and loss).

Moody's notes that the impact of the downturn on the Romanian economy is
significant given the slump on export-oriented sectors and on local
retail demand for goods and services. The rating agency also notes that
the banking system's FC obligations relative to the overall economy and
the central bank's (NBR) FC reserves are quite significant, mainly in the
form of deposits denominated in FC as well as FC borrowings that banks
usually obtain from their European parent banks.

Political and historical evidence suggests that Romania's government is
likely to show moderate support towards its banking system, although in
Moody's opinion its stance towards supporting the systemically important
banks has not changed and is not likely to change in the foreseeable
future. That said, Moody's notes that Romania is currently facing
presidential elections which will determine the stability and functioning
of the country's government. The new government will need to regain the
confidence of international investors. At the same time, the government
will also need to undertake the necessary economic reforms to ensure the
timeliness of a EUR20 billion international aid package, mainly coming
from the International Monetary Fund (IMF) and the European Commission
(EC).

The Baa2 systemic support input for Romanian banks is one notch above the
Baa3 local currency government debt rating. This uplift is predicated on
Moody's view of a "medium" risk of a system-wide banking crisis as well
as a "medium" likelihood of the government ring-fencing its own fiscal
position from the banking system. In addition, NBR's good regulatory and
supervisory framework provides some added comfort about Romania's ability
to provide systemic support to its banking system. In addition, it should
be noted that all three Romanian banks' deposit ratings continue to
benefit from external support coming from their European parent banks.

The BFSR of D+ for BRD, the majority-owned subsidiary of the French Group
Societe Generale, was downgraded to D in the wake of the deep economic
recession in Romania and its impact on the bank's asset quality and
earnings. The rating action was driven by the bank's reduced financial
flexibility, as reflected in depressed profitability, deteriorating asset
quality and reducing provision coverage levels. Although BRD remains well
capitalised with a capital adequacy ratio (CAR) of 12.3% as of September
2009, its net profits for the first nine months of 2009 declined 19%
year-on-year, mainly due to higher provisioning costs that increased by
almost 200%. During 2009, the bank's ratio of gross NPLs to gross loans
has increased significantly based on local standards (classified as
doubtful and loss), excluding any restructured loans, while the NPL
provisioning coverage without considering any collaterals was relatively
low at the end of September 2009.

Moody's believes that these challenges are better captured in BRD's new
BFSR of D (mapping to a Ba2 baseline credit assessment) in line with the
BFSR of the other two rated Romanian banks. Despite BRD's more prudent
lending practices over the past few months, its relatively high exposure
to the small and medium-sized enterprises (SMEs) segment makes its loan
book vulnerable to the effects of the economic recession. Looking ahead,
Moody's expects the elevated credit risk in Romania to continue exerting
pressure on all banks' earnings capacity and capitalisation levels.

Moody's previous rating action for all rated Romanian banks named above
was implemented on 22 June 2009 when the ratings were placed on review
for a possible downgrade.

The principal methodologies used in rating this issuer are "Bank Financial
Strength Ratings: Global Methodology", and "Incorporation of
Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology".
These can be found at www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other methodologies and
factors that may have been considered in the process of rating this
issuer can also be found in the Rating Methodologies sub-directory on
Moody's website.

Headquartered in Bucharest, Banca Comerciala Romana reported total assets
of RON70.8 billion (EUR16.9 billion) as of the end of September 2009.

Headquartered in Bucharest, BRD -- Groupe Societe Generale posted total
assets of RON47.9 billion (EUR11.4 billion) as of the end of September
2009.

Headquartered in Bucharest, Raiffeisen Bank had total assets of RON18
billion (EUR4.3 billion) as of the end of September 2009.