FITCH AFFIRMS VOLKSBANKEN VERBUND AND OEVAG ON ANNOUNCED VBI SALE

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FITCH AFFIRMS VOLKSBANKEN VERBUND AND OEVAG ON ANNOUNCED VBI SALE

FITCH AFFIRMS VOLKSBANKEN VERBUND AND OEVAG ON

ANNOUNCED VBI SALE

Fitch Ratings-London-19 July 2011: Fitch Ratings has affirmed Oesterreichische Volksbanken

Aktiengesellschaft's (OeVAG) Long-term Issuer Default Rating (IDR) at 'A' with a Stable Outlook,

Short-term IDR at 'F1', Support Rating at '1' and Support Rating Floor (SRF) at 'A'. Volksbanken

Verbund's (VB-Verbund) ratings have also been affirmed at Long-term IDR 'A' with a Stable

Outlook, Short-term IDR at 'F1', Individual Rating at 'C/D', Support Rating at '1'and SRF at 'A'. A

full list of rating actions is at the end of this comment.

The rating actions follow the announcement on 14 July 2011 that OeVAG's owners have agreed to

sell OeVAG's 51% stake in its Central and Eastern European (CEE) subsidiary, Volksbank

International AG (VBI), to Sberbank of Russia (Sberbank; 'BBB'/Stable). VBI's sizeable Romanian

subsidiary is excluded from the transaction. While the agreed terms of the sale are not legally

binding, both parties have stated that they intend to close the transaction before end-2011.

Sberbank's ratings remain unaffected by this announcement.

VB-Verbund's and OeVAG's IDRs continue to be based on Fitch's view of sovereign support given

VB-Verbund's sizeable domestic market share and its importance for the Austrian economy. In

Fitch's view, VB-Verbund's domestic market share remains unaffected by the announced sale of

VBI and the sale therefore will not have an impact on VB-Verbund's systemic importance.

However, should the Austrian government's propensity to support the bank weaken or become

constrained by legislative changes, then this would result in a downgrade of the bank's ratings.

In affirming VB-Verbund's Individual Rating, Fitch has taken into account various capital

strengthening measures currently being considered by the group, including the VBI sale. The result

of the European Banking Authority (EBA) EU-wide stress test, published on 15 July 2011,

confirms Fitch's view that OeVAG's core capital position is weak.

Should VB-Verbund's core capital not be strengthened as a result of the measures or should

OeVAG's liquidity position deteriorate, VB-Verbund's Individual Rating will come under pressure.

Apart from the announced VBI sale, other capital raising measures include the sale of a significant

equity stake in Raiffeisen Zentralbank Oesterreich AG (RZB AG) and a reverse merger with its

corporate lending subsidiary, Investkredit AG, planned for Q311.

Under the EBA's worst case scenario, under which OeVAG's core Tier 1 ratio would fall to 4.5% at

end-2012 (unstressed core Tier 1 ratio of 6.4% at end-2010), represents a capital shortfall of

EUR160m. Fitch expects this to be addressed by OeVAG's capital strengthening measures, which

were not considered by the EBA for the purpose of the stress test. These measures will increase

OeVAG's core Tier 1 ratio - according to management - to 6.6% at end-2012, which Fitch would

consider just acceptable.

The agency understands that OeVAG had anticipated an unfavourable EBA stress test result and

has strengthened its liquidity and funding position in the run up to the publication of the stress test

results. While OeVAG has some wholesale funding requirements, partly relating to VBI, its funding

profile benefits from a large extent from its role as central institution for deposit-rich VB-Verbund

member banks and from committed funding from VBI's minority shareholders. As a result,

commercial interbank funding is limited and covered by OeVAG's recently increased liquidity

buffer.

VB-Verbund, which is not a legal entity itself but a cooperative grouping of member banks, is

Austria's fourth-largest banking group (second-largest cooperative banking group). OeVAG is the

central institution of VB-Verbund. As such, Fitch has assigned OeVAG "group" ratings under


Fitch's rating criteria for banking structures backed by mutual support mechanisms. Fitch does not

assign an Individual Rating to OeVAG.

The rating actions are as follows:

VB-Verbund

Long-term IDR affirmed at 'A', Outlook Stable

Short-term IDR affirmed at 'F1'

Support Rating affirmed at '1'

Support Rating Floor affirmed at 'A'

Individual Rating affirmed at 'C/D'

OeVAG

Long-term IDR affirmed at 'A', Outlook Stable

Short-term IDR affirmed at 'F1'

Support Rating affirmed at '1'

Support Rating Floor affirmed at 'A'

Government guaranteed bonds affirmed at 'AAA'

Market Linked Securities affirmed at 'Aemr'

Senior unsecured debt affirmed at 'A'

Short-term notes affirmed at 'F1'

The ratings of the other VB-Verbund member banks have been affirmed at Long-term IDR 'A' with

Stable Outlook and Short-term IDR 'F1'. The full list of VB-Verbund member banks (in addition to

OeVAG) is as follows:

Bank fuer Aerzte und freie Berufe AG

Volksbank Weinviertel e.Gen.

VOLKSBANK OBERES WALDVIERTEL rGmbH

Gaertnerbank, rGmbH

Volksbank Tullnerfeld eG

Volksbank Bad Goisern eingetragene Genossenschaft

Volksbank Osttirol rGmbH

Volksbank Oetscherland eG

Volksbank Fels am Wagram e.Gen.

Volksbank Krems-Zwettl AG

Volksbank Laa eGen

Volksbank Marchfeld e.Gen.

Volksbank, Gewerbe- und Handelsbank Kaernten AG

VOLKSBANK fuer den Bezirk Weiz rGmbH

Volksbank Tirol Innsbruck-Schwaz AG

Volksbank Altheim-Braunau rGmbH

Volksbank Feldkirchen, rGmbH

Volksbank Schaerding eG

Volksbank Steirisches Salzkammergut, rGmbH

VOLKSBANK BADEN e.Gen.

VOLKSBANK OBERKAERNTEN rGmbH

VOLKSBANK VOECKLABRUCK-GMUNDEN e.Gen.

Volksbank Wien AG

Volksbank Enns- und Paltental rGmbH

Volksbank Bad Hall e.Gen.

Volksbank Linz-Wels-Muehlviertel AG

Volksbank Gmuend eingetragene Genossenschaft

Allgemeine Bausparkasse rGmbH

Volksbank Alpenvorland e.Gen.

Waldviertler Volksbank Horn rGmbH

Volksbank Ost rGmbH

Volksbank Kufstein eG

Volksbank Ried im Innkreis eG


Volksbank Enns-St. Valentin eG

Volksbank Friedburg rGmbH

Oesterreichische Apothekerbank eG

Volksbank Voecklamarkt-Mondsee rGmbH

Volksbank Gailtal eG

Volksbank Niederoesterreich Sued eG

Volksbank Oberndorf rGmbH

Volksbank Obersdorf-Wolkdersdorf-Deutsch-Wagram e.Gen.

VOLKSBANK GRAZ-BRUCK e.Gen.

Volksbank Muerztal-Leoben e.Gen

Volksbank Eferding-Grieskirchen rGmbH

Volksbank fuer die Sued- und Weststeiermark rGmbH

Volksbank Donau-Weinland rGmbH

Wiener Spar- und Kreditinstitut rGmbH

Volksbank Salzburg eG

Volksbank Almtal e.Gen.

VOLKSBANK VORARLBERG e.Gen.

VOLKSBANK LANDECK eG

Volksbank Aichfeld-Murboden rGmbH

SPARDA-BANK VILLACH/INNSBRUCK rGmbH

Volksbank Kaernten Sued e.Gen.

IMMO-BANK AG

Volksbank Niederoesterreich-Mitte e.G.

Volksbank Sued-Oststeiermark e.Gen.

Volksbank Suedburgenland rGmbH

SPARDA-BANK LINZ rGmbH

VB Factoring Bank AG

Volksbank-Quadrat Bank AG

Contact:

Primary Analyst

Anna Deineko ACCA

Analyst

+44 20 3530 1538

Fitch Ratings Limited

30 North Colonnade

London E14 5GN

Secondary Analyst

Christian Kuendig

Director

+44 20 3530 1399

Primary Analyst for Sberbank of Russia

Vladimir Markelov

Director

+7 495 956 7063

Fitch Ratings CIS Limited

6 Gasheka Street

Moscow, 125047, Russia

Committee Chairperson

Claudia Nelson

Senior Director

+ 44 203530 1191

Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email:

hannah.huntly@fitchratings.com.


Additional information is available at www.fitchratings.com.

Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 16 August 2010,

'Short-Term Ratings Criteria for Corporate Finance', dated 2 November 2010 and 'Rating Criteria

for Banking Structures backed by Mutual Support Mechanisms', dated 11 April 2011 are available

at www.fitchratings.com.

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685

Short-Term Ratings Criteria for Corporate Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726

Rating Criteria for Banking Structures Backed by Mutual Support Mechanisms

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=591785

Volksbanken Verbund

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595627

Volksbanken Verbund

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=539483

Oesterreichische Volksbanken Aktiengesellschaft

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=539484

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