S&P Lowers Eurasia Insurance Rating to Equalize with Parent Bank

April 20, 2007

Standard & Poor’s Ratings Services has lowered its long-term counterparty credit and insurer financial strength ratings on Kazakhstan-based Eurasia Insurance Co. to “B” from “B+” to equalize with the long-term rating on its new parent, JSC Eurasian Bank. The outlook is positive.

S&P also revised its rating outlook on Eurasian Bank to positive from stable, and affirmed the “B/B” counterparty credit ratings. S&P also noted that it has “raised its Kazakhstan national scale rating on Eurasian Bank to ‘kzBBB-‘ from ‘kzBB+’ and lowered its Kazakhstan national scale rating on Eurasia Insurance to ‘kzBBB-‘ from ‘kzBBB’ to equalize the ratings.”

S&P explained that the “bank and the insurance company benefit from business connections and capital support from their ultimate shareholders (a group of wealthy and influential Kazakh businessmen).”

S&P credit analyst Annette Ess indicated: “The ratings on Eurasian Bank reflect its modest customer franchise, the limited track record of the new strategy, and rapid loan growth. Positive rating factors include its wealthy and supportive shareholders, diversifying franchise and customer base, good profitability, and adequate capitalization.”

The bank also benefits from larger more diversified sources of revenue as an owner of insurance, pension fund, and asset-management operations.

“The positive outlook on the bank and the insurance company reflects the prospect of increased revenue and earnings diversification and volume, as well as likely improvements in the competitive position and financial flexibility of what is expected to become an increasingly integrated financial services group,” Ess added.

“Although operational synergies between the various entities will only be modest at first, the financial synergies promise more efficient use of the group’s capital base and better, more stable results,” said the bulletin. “As such, the bank and the insurer are considered strategically important to each other, and the respective ratings are expected to remain at the same level as each other.

“An upgrade of the bank and the insurance company would be driven by a longer track record of the new consolidated grouping operating successfully together, by greater shareholder stability, by an improvement in capitalization and profitability, and by a further decrease in concentration levels on both sides of the bank’s balance sheet. Less likely, a downgrade could result from any significant worsening of capitalization ratios, an inability to manage the bank’s targeted rapid asset growth, and any significant deterioration in asset quality or operating performance.”

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