London, 20 June 2012 -- Moody's Investors Service has today downgraded the ratings of Ceskoslovenska obchodni banka (CSOB Czech Republic) and Ceskoslovenska obchodna banka (CSOB Slovakia), two subsidiaries of KBC Bank NV.

These downgrades are prompted by the weakened financial capacity of the Belgian parent group, KBC Bank, as indicated by Moody's downgrade on 15 June of the bank's standalone Bank Financial Strength Rating (BFSR) to D+ (mapping to a standalone credit assessment of baa3) from C-/baa1 and the downgrade of KBC Bank's long-term debt and deposit ratings to A3 from A1.

Moody's says that an additional factor contributing to the downgrade of the Czech subsidiary's ratings is the weakening operating environment in the Czech Republic. For further details on the KBC Bank downgrade, please see "Moody's downgrades KBC Bank and KBC Group; outlook stable" published on 15 June 2012. http://www.moodys.com/research/Moodys-downgrades-KBC-Bank-and-KBC-Group-outlook-stable--PR_248302

Today's actions on the two subsidiaries conclude the reviews initiated on 21 February 2012, when the ratings of these subsidiaries were placed on review for downgrade, following the pressures facing the parent group KBC Bank, as well as from standalone considerations for the Czech subsidiary with respect to its own market.

A full list of affected ratings is provided at the end of this press release. For additional information on bank ratings, please refer to the webpage containing Moody's related announcements: ttp://www.moodys.com/bankratings2012.

RATINGS RATIONALE --- CSOB (CZECH REPUBLIC)

Moody's says that the one-notch downgrade of CSOB Czech Republic's long-term deposit ratings to A2 from A1 and the standalone BFSR to C-/baa1 from C/a3 reflects (i) the pressures that the bank faces from the weakening of KBC Bank group's credit profile; and (ii) the more difficult operating environment in Czech Republic that Moody's believes will likely dampen earnings generation and pressure asset quality.

--- PRESSURES FROM THE GROUP'S WEAKENED CREDIT PROFILE

Moody's recognises that CSOB Czech Republic is an important part of KBC Bank's overall franchise, contributing almost one third of the KBC Bank's profits in 2011. However, pressure on CSOB Czech Republic's performance stems from (i) the risk of overall parent group restrictions limiting the extent to which the subsidiary can increase its risk-weighted assets; (ii) the risk of capital being up-streamed to the parent, directly deteriorating the subsidiary's capital cushion (dividends in 2011 exceeded 2010 profits); and (iii) cost reductions at group level, which may lead to a decline in group support that has historically underpinned the bank's operating strength.

--- MORE DIFFICULT OPERATING ENVIRONMENT

Moody's says that the operating environment in the Czech Republic has weakened, as illustrated by the slowdown in economic output and further downside risks related to weakening export demand from European trading partners. Real GDP contracted by 0.7% year-on-year in Q1 2012, and Moody's expects GDP growth of 0% in 2012, compared to 1.7% in 2011, as reported in Moody's Country Credit Statistical Handbook, whilst the European Commission forecasts unemployment to increase to 7.2% in 2012.

Despite CSOB Czech Republic's strong capital position -- with a 11% Tier 1 ratio as of March 2012 -- and its solid funding profile, Moody's expects that the economic slowdown will outweigh these mitigating factors. Specifically, Moody's expects that the weakening operating environment will constrain earnings and exert pressure on the bank's problem loans from the level of 3.9% posted at end-2011.

The deposit ratings of CSOB Czech Republic, which is one of the largest banks in the country, continue to benefit from two notches of uplift from systemic support, reflecting the very high probability of support from the Czech government, in case of need. The negative outlook on the bank's deposit ratings reflects the possibility that pressures on the parent could lead to the bank becoming more weakly positioned in the C- BFSR category, resulting in a lower standalone credit assessment of baa2.

WHAT COULD MOVE THE RATINGS UP/DOWN

The negative outlook on CSOB Czech Republic's deposit ratings reflects Moody's expectation that upwards pressure on the bank's ratings is limited at this stage. Over time, the ratings could be stabilised if the bank strengthens its performance metrics and/or pressures from the parent group subside.

Further downwards pressure on the standalone and deposit ratings could be exerted following (i) weaker-than-expected performance at the group level; and/or (ii) or a worse-than-expected weakening of the operating environment.

RATINGS RATIONALE --- CSOB (SLOVAKIA)

Moody's says that the one-notch downgrade of CSOB Slovakia's long and short-term deposit ratings to Baa3/Prime-3 from Baa2/Prime-2 reflects the weakening capacity of the parent, KBC Bank NV, to provide timely capital and funding support to its subsidiary, if needed, as indicated by the two-notch downgrade of the parent group on 15 June 2012.

--- WEAKENING CAPACITY OF THE PARENT BANK TO PROVIDE SUPPORT

Under Moody's Joint Default Analysis methodology, the long-term ratings of the Slovak subsidiary incorporate uplift from parental support assumptions; the two-notch lowering of KBC Bank's standalone credit strength prompted the one-notch rating downgrade for the Slovak subsidiary's deposit ratings.

WHAT COULD MOVE THE RATINGS UP/DOWN

Currently, CSOB Slovakia's ratings reflect its high borrower concentration, including exposure to commercial real-estate and project finance, and its challenging asset-quality profile. Moody's says that these factors are counterbalanced by CSOB Slovakia's solid franchise in the Slovak market (relative to its peers) and its currently adequate capitalisation levels.

In the medium-term, a sustained reduction in borrower concentration and an improvement in asset quality could exert upwards pressure on the bank's ratings. Conversely, a significant deterioration in the bank's financial fundamentals, particularly related to asset quality, liquidity and capitalisation, could exert downwards pressure on the ratings. In addition, further significant downwards pressure on KBC Bank's ratings could affect CSOB Slovakia's ratings.

LIST OF AFFECTED RATINGS

The following ratings were affected today:

..Issuer: CSOB Czech Republic

Long-term local and foreign-currency deposit ratings downgraded to A2 from A1, with negative outlook

Short-term local and foreign-currency deposit ratings of Prime-1 confirmed

Bank financial strength rating downgraded to C-/baa1 from C/a3, with stable outlook

..Issuer: CSOB Slovakia

Long-term local- and foreign-currency deposit ratings to Baa3 from Baa2, with stable outlook

Short-term local- and foreign-currency deposit ratings to Prime-3 from Prime-2

The following ratings were unaffected:

..Issuer: CSOB Slovakia

BFSR of D/ba2, with a stable outlook

The methodologies used in rating Ceskoslovenska obchodni banka, a. s. were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: Global Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

The methodologies used in rating CSOB Slovakia were Bank Financial Strength Ratings: Global Methodology, published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: Global Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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Information sources used to prepare the rating(s) for Ceskoslovenska obchodni banka, a. s. are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Information source used to prepare the rating(s) for CSOB Slovakia is the following: public information, and confidential and proprietary Moody's Investors Service information.

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