MOODY’S ASSIGNS B1/NP/E+ TO ARMENIA’S ANELIK BANK

Interfax News Agency
Russia & CIS Business and Financial Newswire
February 28, 2007 Wednesday 8:46 PM MSK

Moody’s Investors Service has assigned the following ratings to Anelik
Bank (Armenia): B1/Not-Prime long-and short-term local currency deposit
ratings, B1/Not-prime long-and short- term foreign currency deposit
ratings, and an E+ Financial Strength Rating (FSR), the ratings agency
said in a press release.

All ratings carry a stable outlook, the release says.

The bank’s E+ Financial Strength Rating (FSR) reflects its good asset
quality, adequate liquidity and strong profitability.

The FSR also takes into consideration that while trying to expand its
product base the bank is currently a niche player, with its money
transfer business generating around 60% of operating income before
taking into consideration FX translation gains.

The significant impact of this line of business on bottom line
profitability highlights the bank’s sensitivity to competitive
pressures in this sector. The rating also takes into account the
bank’s asset quality that, although currently robust, is subject to
risks relating to Armenia’s potentially volatile operating environment
as well as to currency-induced credit risk, as a large percentage
of loans is FX denominated. Supporting the ratings is the bank’s
capitalization which is maintained at appropriate levels, given
operating environment concerns.

We also note that, in common with other Armenian banks, Anelik Bank’s
efforts to develop its retail business and expand its retail product
range are constrained by the country’s small population and low income
levels, together with the public’s lack of confidence in the system,
having experienced losses during the 1990s when a large number of
local banks closed down – though there are signs that confidence
levels are gradually improving.

Meanwhile, as the bank expands its product range it will need to
further improve risk management and IT infrastructure. Given its
moderate market share (ranking seventh in Armenia in terms of banking
system assets) the B1 long-term local currency and the B1 long-term
foreign currency deposit ratings assigned to AB reflect not only the
bank’s intrinsic strength but also some, albeit limited, support from
the Armenian authorities in case of need.

Consequently the bank’s long-term foreign currency deposit rating is
lifted to the upper end of the range that its FSR implies.

Headquartered in Yerevan, as at June 2006 Anelik Bank reported total
assets of AMD25.6 billion ($58.8 million)