Moody’s changed outlook on FUIB to align with Ukraine’s sovereign rating outlook

Moody's Investors Service changed the outlook on FUIB and some other Ukrainian banks. FUIB’s outlook is changed to negative from stable on the local-currency (LC) deposit rating and foreign currency debt rating. This aligns the banks' outlooks with the negative outlook on the Government of Ukraine's B2 rating and reflects the extent to which the banks' creditworthiness is correlated with that of the country's national government.

Moody's has also downgraded the National Scale Ratings (NSRs) of First Ukrainian International Bank to A3.ua from A2.ua, reflecting the bank's weakening position amongst Ukrainian peers in the context of the outlook change on the bank's Global Scale Ratings.

For FUIB the outlook change reflects a high level of correlation to the sovereign due to:

1. The bank's sizeable exposure to Ukraine's government bonds, which account for almost 100% of the bank's Tier 1 capital, as of year-end 2011;

2. The geographical concentration of the bank's business in Ukraine's weak and volatile operating environment;

3. The extent of its reliance on market-based funding, which is typically more confidence-sensitive.

“The actions of Moody’s were primarily driven by a reassessment of Ukraine’s outlook, and hence the need to align with FUIB and other banks’ outlooks to the latter, which doesn’t depend on FUIB, − says Konstantin Vaysman, Chairman of FUIB. – FUIB’s balance structure is sustainable, while its exposure to sovereign bonds is well balanced in relation to its balance sheet. Moreover, sovereign bonds in FUIB’s portfolio provide a liquidity cushion. FUIB is one of the most liquid banks in the local banking system. Its credits to deposits ratio stands at 100%, which makes FUIB independent of the external sources of funding. FUIB’s financial performance is improving constantly. Moreover, FUIB management is consistently strengthening the balance structure, advancing assets and liabilities diversification, improving profitability and capitalization of the Bank”.

Moody's considers that upwards pressure on the ratings may be exerted with a combination of an improving operating environment, declining sovereign-risk exposures (decrease of government bonds in the bank’s portfolio) and increasing cross-border diversification.

FUIB ratings as of 17.07.12: