FRANKFURT (MNI) – Standard and Poor’s has downgraded four Greek
banks to B+ on Thursday and has kept all the ratings on “watch
negative”.

The following is the second part of a verbatim text of the press
release, detailing the reasons for the individual downgrades:

UBB

In our downgrade of UBB today, we have removed the one-notch uplift
over our SACP assessment that we had previously incorporated into our
rating on UBB to account for potential additional parent support. We
have also lowered our SACP assessment by one notch, to ‘b+’ from ‘bb-‘,
to reflect UBB’s reliance on funding support from NBG.

Consequently, our rating on UBB now reflects our assessment of its
SACP and does not incorporate any uplift for potential additional
parental support, even though there are no indications that NBG’s stance
toward support for UBB has diminished. We are concerned, however, that
if NGB faces significantly increased pressure on its own financial
profile, it could withdraw existing support for its Bulgarian
subsidiary.

EFG

The lowering of our long-term rating on EFG primarily reflects our
view of the heightened economic and industry risks in EFG’s home banking
market, posed by developments in Greece’s sovereign creditworthiness. At
their current level, the ratings factor in our opinion of EFG’s high
credit risk profile compared with that of its Western European peers;
significant exposure to Southeastern European markets; imbalances in its
funding profile, which increased rapidly in 2010; deteriorating
financial and asset quality performance; and moderate capitalization.
The ratings are supported by our view of EFG’s strong management team
and sound franchise in its domestic market.

We believe that competition among Greek banks to attract retail
funding will remain harsh in 2011 in a difficult operating environment,
thus maintaining the cost of funding at persistently high levels.
Coupled with declining business volumes in EFG’s domestic market, this
will, in our view, reduce the bank’s loss absorption capacity at a time
when we believe that the cost of risk is set to increase further owing
to deteriorating asset quality. Our current ratings on EFG incorporate
the possibility that the bank may report operating losses in 2011,
though we anticipate that any such losses would remain at fairly
manageable levels of about 35 basis points (bp) of adjusted total
assets. In our opinion, EFG’s problem assets (which include problem
loans past due by more than 90 days, before write-offs) will likely
continue growing in 2011; we factor into the ratings the possibility of
problem assets accounting for about 17% of EFG’s credit portfolio at
year-end 2011. We estimate that EFG’s year-end 2010 RAC ratio before
diversification will likely be about 5.5%, a level that we view as weak.
We also estimate that the expected capital gains from the completion of
EFG’s transaction in Poland, which we believe the bank will realize by
year-end 2011, could represent about 70 bp of EFG’s risk-weighted assets
according to our RAC framework. Given their relatively moderate impact,
these gains would not materially change our view of EFG’s solvency
position.

ALPHA

The lowering of our long-term rating on Alpha primarily reflects
our view of the heightened economic and industry risks in Alpha’s home
banking market, posed by developments in Greece’s sovereign
creditworthiness. The ratings now reflect our view of Alpha’s higher
credit risk profile compared with that of its Western European peers;
greater vulnerability to a weaker economic environment than previously,
which is likely to negatively affect the bank’s profitability and asset
quality; funding imbalances, which increased rapidly in 2010; and risks
arising from exposure to Southeastern European markets. The ratings on
Alpha are supported by our view of the bank’s valuable franchise in its
domestic market and increasingly diversified business profile.

We anticipate that Alpha’s asset quality is likely to deteriorate
further in 2011, on the back of what we see as ongoing deterioration of
the bank’s operating environment in Greece. According to our estimates,
Alpha’s total problem assets (which include problem loans past due by
more than 90 days, before write-offs) could represent about 13% of its
consolidated credit portfolio at year-end 2011. Growth in problem assets
is also, in our view, likely to lead to higher credit provisions this
year, which could end up exceeding the bank’s loss absorption capacity.
We have incorporated into our ratings on Alpha the possibility that the
bank may report operating losses in 2011, though we anticipate that any
such losses would be manageable, representing about 20 bp of adjusted
total assets. We estimate the bank’s RAC ratio before diversification at
6.7% as of year-end 2010. We believe that, at this level, Alpha’s
solvency does not immunize the bank from what we see as heightened risks
related to Greece’s economic and operating environment. Although we view
Alpha as being less exposed than its domestic peers to Greek government
bonds, its portfolio of government debt accounts for a still meaningful
0.9x the bank’s TAC as of year-end 2010, according to our estimates.

PIRAEUS

The lowering of our long-term rating on Piraeus primarily reflects
our view of the heightened economic and industry risks in Piraeus’ home
banking market, posed by developments in Greece’s sovereign
creditworthiness. The ratings also factor in our view of Piraeus’ higher
credit risk profile compared with that of its Western European peers;
exposure to Southeastern European markets; funding imbalances, which
increased rapidly in 2010; and vulnerability to a weaker economic
environment in Greece than in the past few years, which we believe will
likely weigh on its performance and asset quality. The ratings on
Piraeus remain supported by our view of the bank’s good domestic market
position, successful strategy, and focused management.

In our view, further deterioration in Piraeus’ credit portfolio is
likely to push up credit losses in 2011 to levels exceeding the bank’s
loss absorption capacity. At the same time, we believe that declining
business volumes and a still high cost of funding will likely constrain
Piraeus’ revenue stream. Given the negative operating environment we
anticipate in Greece, we are factoring into our ratings on Piraeus the
possibility that the bank may report operating losses in 2011. We
believe, however, that their impact on solvency will remain manageable;
our current ratings on Piraeus incorporate our estimate that, in such a
scenario, net operating losses would not exceed about 35 bp of average
adjusted assets in 2011. We estimate that Piraeus’ RAC ratio before
diversification was 5.9% at yearend 2010. In the first few months of
2011, the bank successfully completed a capital increase; the total
equity raised should, in our opinion, enable Piraeus to increase its RAC
ratios by about 150 bp. Nevertheless, we still believe that Piraeus’
solvency does not immunize the bank from the heightened risks related to
Greece’s economic and operating environment.

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