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UniCredit: Standard & Poor's affirms the ratings of the Group

UniCredit announces that today the rating agency Standard & Poor's affirmed the long term (A+) and short term (A-1) ratings assigned to UniCredit SpA and Bank Austria Creditanstalt AG.

Outlook is stable for both banks.

These rating actions follow the announcement that Bank Austria Creditanstalt AG, responsible within the UniCredit Group for commercial banking activities in CEE, has signed a share purchase agreement with private shareholders to acquire a majority shareholding in JSC ATF Bank in Kakakhstan.

Attached the complete text of Standard & Poor's press release.


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UniCredito And Bank Austria Affirmed At 'A+/A-1' On Agreed ATF Bank Purchase; Outlook Stable

Publication date: 22-Jun-2007
Primary Credit Analyst: Alberto Buffa di Perrero, Milan (39) 02-72111-205;
Secondary Credit Analyst: Stefan Best, Frankfurt (49) 69-33-999-154;


On June 22, 2007, Standard & Poor's Ratings Services affirmed its 'A+' long-term and 'A-1' short-term counterparty credit ratings on Italian bank UniCredito Italiano SpA and its subsidiary Bank Austria Creditanstalt AG (BA-CA). The outlook on both entities is stable.

The affirmations follow the announcement that Bank Austria Creditanstalt AG, which is responsible within the UniCredito group for commercial banking activities in Central and Eastern Europe (CEE), has signed a share purchase agreement to acquire a majority shareholding in ATF Bank (B+/Watch Pos/B), the fourth-largest bank by assets in Kazakhstan. The deal is subject to regulatory authorizations. For more information on ATF Bank, please see our related research update "Kazakhstan ATF Bank 'B+' Rating Placed On Watch Positive On UniCredito Agreed Share Purchase" published today on RatingsDirect.

The affirmations reflect the overall moderate impact of this potential deal on the group's business and financial profiles. The acquisition would, however, further increase the managerial complexity of undertaking integrations and turnarounds in many different Western European and CEE countries. UniCredito's pace of growth has continued relentlessly since the 2005 purchase of Germany-based Bayerische Hypo- und Vereinsbank AG (HVB; A/Positive/A-1), namely with the current merger agreement with Italy's Capitalia SpA (A/Watch Pos/A-1).

UniCredito will be challenged to reach an adequate return on investment with regard to ATF, given the high price it will have to pay (goodwill in excess of $1.7 billion for 100% of ATF). We will monitor the bank's ability to reach its stated core Tier I capital target of 6.8% by year-end 2008 (5.9% at March 31, 2007), considering, in addition to ATF, other planned cash disbursements such as the purchase of HVB and BA-CA minorities.

The ratings on UniCredito continue to reflect the bank's strong business and geographic diversification in its core markets of Italy, Germany, and Austria; strategic presence in fast-growing economies in CEE; good integration track record and clear strategy; and satisfactory profitability at the Italian and CEE businesses. The ratings are constrained, however, by structurally weaker asset quality than that of peers, the still low profitability of the German and Austrian operations, only adequate capital ratios, and the operational complexity in creating a European banking group operating in a variety of regulatory and economic environments.


The stable outlook reflects Standard & Poor's expectation that UniCredito will be able to maintain solid business and financial profiles. Operational integration of the HVB group is on track so far, but acquisitions currently in progress (Capitalia and ATF) represent further managerial burdens that could stretch management in achieving its financial and organizational targets.

A material deterioration in credit risk, any need to undertake disproportionately high credit charges linked to legacy problems, or inability to turn around the current low-profit businesses would put pressure on the current ratings. In addition, downward pressure could also arise if UniCredito were to undertake material acquisitions that would further increase managerial complexity or put the group's financial targets out of reach.

A material increase in core profitability and capitalization, together with a reinforcement of current asset quality, would position UniCredito for an upgrade.