Fitch Assigns Abanka Vipa's Guaranteed Notes Expected 'AA' Rating

Fitch Ratings issued the following statement on Tuesday:

"The notes benefit from a guarantee provided by the Republic of Slovenia ('AA'/Outlook Stable). A change in the Republic of Slovenia's ratings would thus impact the rating of the guaranteed notes.

The expected 'AA' rating is based on the information provided by Abanka and third parties. The final rating is contingent upon the receipt of final documents conforming to information already received.

Abanka's Negative Outlook reflects the impact of a deteriorating Slovenian operating environment, which has put increased pressure on its profitability and asset quality, and a lack of diversification in the bank's funding base.

However, these negative factors are balanced by Abanka's sound corporate franchise, shrinking equity exposure and satisfactory capitalisation. Fitch expects the bank to maintain a level of capital that is commensurate with its risk profile.

At end-H109, Abanka was the third-largest bank in Slovenia by total assets, with an 8.2% market share. Its three largest shareholders, including Zavarovalnica Triglav d.d, a Slovenian state-controlled insurance company, have a strategic interest and hold a total 59.3% of voting rights at present. At end-H109, Abanka employed 892 staff.

Fitch revised Abanka's Outlook to Negative from Stable on 27 July 2009. At the same time, the agency affirmed the bank's Long-term Issuer Default Rating (IDR) at 'BBB', its Short-term IDR at 'F3', Individual Rating at 'C', Support Rating at '3' and Support Rating Floor at 'BB+'. Fitch also affirmed Abanka's hybrid capital instruments at 'BB+' on the same date.

In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs."