OREANDA-NEWS.  Moody's Investors Service today affirmed Aa2/Prime-1/B- (stable rating outlooks) of Belgium/'s KBC Bank and placed under review for possible upgrade the B1/NP/E+ (positive outlooks), B1 senior unsecured notes (positive outlook), as well as the A1.ru national scale rating of Russia/'s Absolut Bank following the announcement made by KBC Bank that it will acquire a majority stake of 92,5% in Absolut Bank. The closing of the transaction is expected in the third quarter of 2007, subject to regulatory approvals. Moody/'s stated that this acquisition, valued at $761 million for a 100% stake, was in line with KBC Bank/'s strategy to grow its activities outside of Belgium with a focus on Central and Eastern Europe and selective neighboring countries, and would only have a modest impact on its capitalization and risk profile. Moody/'s regards maintaining strong risk controls over remote operations including Central and Eastern European activities as a credit challenge for KBC. Nevertheless, the bank has a sound control blueprint for a group with substantial remote operations, in Moody/'s opinion. KBC/'s new risk management has been largely implemented, but evidence on the effectiveness of the new controls will require the test of time, the rating agency added.

Moody/'s review for possible upgrade of Absolut Bank reflects the possible improvement of the franchise, financials and of the overall risk management of the bank through its ownership by KBC Bank.

KBC Bank is a 100% subsidiary of KBC Group, which is based in Brussels, Belgium. The bank group reported total consolidated assets of 325 billion at year-end 2006 and net income of $3,4 billion for the year 2006.

Based in Moscow, Russia, and with operations in Saint Petersburg and other nine selected regions, Absolut Bank reported total assets of RUB66,3 billion ($1,91 billion) at year-end 2006, ranking it 25th largest bank in Russia, according to Interfax. Its net income amounted to RUB686 million (19,6 million), up 69,8% from RUB404 million ($11,9 million) for the previous year.