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Rating Action:

MOODY'S AFFIRMS RATINGS OF NATIONAL BANK OF GREECE AND FINANSBANK (TURKEY); PLACES FINANSBANK'S Baa3/P-3 LOCAL CURRENCY DEPOSIT RATINGS ON REVIEW FOR POSSIBLE UPGRADE

05 Apr 2006
MOODY'S AFFIRMS RATINGS OF NATIONAL BANK OF GREECE AND FINANSBANK (TURKEY); PLACES FINANSBANK'S Baa3/P-3 LOCAL CURRENCY DEPOSIT RATINGS ON REVIEW FOR POSSIBLE UPGRADE

Action follows National Bank of Greece's planned acquisition of a controlling stake in Finansbank A.S. (Turkey)

Limassol, April 05, 2006 -- Moody's Investors Service has affirmed the A2/Prime-1 foreign currency deposit, A2 senior debt, A3 subordinated debt, Baa1 preferred securities rating and C financial strength rating (FSR) of National Bank of Greece S.A. (NBG). At the same time, Moody's has affirmed the B1/Not-Prime foreign currency deposit ratings and D+ FSR of Turkey's Finansbank A.S., while its Baa3/Prime-3 local currency deposit ratings were placed on review for possible upgrade. Moody's also affirmed the Ba3 long-term foreign currency senior unsecured issuer rating assigned to Finans Finansal Kiralama A.S. (Finans Leasing), which is the majority controlled leasing subsidiary of Finansbank. This rating action results from NBG's plan to acquire a controlling stake in Finansbank.

NBG plans to buy a 46% stake in Finansbank from the bank's founder and controlling shareholder Husnu Ozyegin -- who will keep a 9.7% stake, and NBG will proceed with a public offer for the remaining 44.3% stake in order to achieve a controlling shareholding. The acquisition, which is subject to regulatory approvals, is expected to be completed during the third quarter of 2006. NBG plans to buy the domestic activities of Finansbank, including its leasing, asset management and brokerage subsidiaries, as well as the bank's subsidiary in Malta. As part of the transaction at closing Finanbank's other international operations -- in Russia, Romania, Switzerland and the Netherlands -- will be sold back to FIBA Holdings, which is owned by Finansbank's founder.

Moody's commented that NBG's entry into the Turkish market through Finansbank is in line with its strategy to become a leading banking group in Southeast Europe. Turkey is the largest economy in this region, with a population of 70 million and a low banking penetration, suggesting that the Turkish banking sector is expected to experience significant growth in the future, especially as the county converges to become a European Union member. Finansbank is the fifth-largest private bank in Turkey, and the eighth-largest overall. Operating through a network of 221 branches in Turkey and one in Bahrain, Finansbank commands market shares in Turkey of 5.5% and 2.5% in loans and deposits, respectively, with a particular strength in credit cards.

The tie up of NBG and Finansbank will result in the largest banking group in the region, present in six countries with a combined population of 125 million, with a customer base of 10.6 million serviced through a branch network of 1,060 units, and a total balance sheet of about EUR69 billion. Moody's added that the transaction is the largest overseas investment by a Greek bank, and the most significant financial deal involving Greek and Turkish interests, signifying the important political rapprochement between the two countries.

In affirming NBG's ratings, Moody's noted that these ratings are underpinned by its dominant position in Greece -- with leading positions in most key financial segments. The ratings are also supported by the bank's improving key financial metrics, reflecting an increasing recurring profitability, enhanced credit quality, solid funding base and adequate capital levels. The acquisition of a relatively large institution, such as Finansbank, active in a less mature and more volatile operating environment, such as Turkey, is expected to increase NBG's overall risk profile and to result in potentially higher earnings volatility. However, Moody's believes that this change is not material enough to warrant a ratings downgrade. In addition, Moody's said the affirmation of NBG's C FSR is also based on the expectation that NBG will raise its equity by up to EUR3 billion through a rights issue, guaranteed in an underwritten commitment by a group of international banks, and that the bank is committed to maintaining its core Tier 1 ratio over 7.5%.

Moody's, however, cautioned that NBG's FSR could be negatively impacted by a number of issues going forward, including, for example, (a) unforeseen problems and challenges related to the acquisition and integration processes; (b) any significant worsening in the Turkish operating environment that could impact the financial performance of Finansbank; (c) any major setback in the political relationship between the two countries that could affect the franchise of Finansbank; (d) any significant deterioration in NBG's financial performance, and (e) any additional major acquisitions that could result in a higher risk profile and could stretch its financial resources.

Moody's decision to affirm Finansbank's D+ FSR takes into account Finansbank's good -- and improving -- franchise within its domestic market, as well as its strong financial indicators, underscored by its healthy profitability, strong capital base and excellent asset quality. At the same time, Moody's notes that its concerns about the loss of the bank's international operations, which provide diversification and funding benefits to the Turkish bank, will be mitigated by the inclusion of Finansbank in the NBG Group which will allow it access to less expensive funding alternatives through NBG's strong credit ratings.

Finansbank's foreign currency deposit ratings, affirmed at B1/Not-Prime, are constrained by the country ceiling for such deposits in Turkey and will continue to increase in line with any increase in the country ceiling. In placing the Baa3/Prime-3 local currency deposit ratings on review for possible upgrade, Moody's expects that the NBG Group has the ability and willingness to provide external support in the event of need to Finansbank, at a level higher than was previously the case. Given that NBG's deposit ratings are currently at the A2 level, there is considerable scope for Finansbank's Baa3/Prime-3 ratings to converge toward the A3/Prime-2 country ceiling for local currency deposits in Turkey.

In affirming Finans Leasing's Ba3 senior unsecured issuer rating, Moody's notes that the rating is constrained by the country ceiling for such ratings in Turkey, and will continue to rise in line with any increase in the country ceiling. The transaction is not expected to change the shareholding structure of Finans Leasing -- with Finansbank A.S. retaining a majority share.

The following ratings were affected by this rating action:

National Bank of Greece S.A. -- A2/Prime-1 foreign currency deposit and C financial strength ratings were affirmed;

NBG Finance plc -- A2 senior debt and A3 subordinated debt ratings were affirmed;

National Bank of Greece Funding Ltd -- Baa1 preferred securities rating was affirmed;

Finansbank A.S. -- B1/Not-Prime foreign currency deposits and D+ financial strength ratings were affirmed; Baa3/Prime-3 local currency deposits ratings were placed on review for possible upgrade;

Finans Finansal Kiralama A. S. -- Ba3 long-term foreign currency senior unsecured issuer rating was affirmed;

Headquartered in Athens, National Bank of Greece had total assets of EUR60.4 billion at year-end 2005. Headquartered in Istanbul, Turkey, Finansbank A.S. had assets of EUR8.2 billion (excluding the international operations) as at December 2005. Also headquartered in Istanbul, Turkey, Finans Leasing had total assets of EUR225 million.

Limassol
Constantinos Pittalis
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Limited
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Limassol
Boyd Anderson
Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Limited
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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