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Rating Action:

Moody's downgrades SNS Bank LT ratings to A2 from A1, stable outlook

15 Jan 2009

Moody's also downgrades SNS Reaal LT ratings to Baa1 from A3, stable outlook

Paris, January 15, 2009 -- Moody's Investors Service has today downgraded SNS Bank N.V.'s (SNS Bank) Bank Financial Strength Rating (BFSR) to C from C+ as well as the long-term senior debt and deposit ratings to A2 from A1. The outlook on the BFSR and all long term ratings is changed to stable from negative. The short-term ratings are affirmed at Prime 1. Senior debt ratings of the holding company SNS Reaal N.V. have been downgraded by one notch to Baa1 from A3.The outlook on all long-term ratings is changed to stable from negative. Short-term debt ratings are affirmed at Prime 2. The Insurance Financial Strength Ratings (IFSR) of Reaal Levenverzekeringen and Reaal Schadeverzekeringen are unchanged at A2 with negative outlooks. For a complete list of SNS Reaal and SNS Banks' ratings, please refer to the list of ratings below.

The rating action reflects Moody's expectations of a decrease in the bank's profitability as a result of the likely deterioration of the bank's asset quality in light of its significant risks concentrations to the real-estate markets in a weakening economic environment. The higher cost of funding will also weigh on the bank's costs. The bank's profitability is structurally low given the prominence of its mortgage business in a very competitive market.

SNS Bank is primarily a mortgage lender in the Netherlands, a business generating low but stable revenues and relatively low risk. The bank's risk profile has however increased with the development of SNS Property Finance activities in investment management and project financing. SNS Property Finance portfolio accounts for 21% of the bank's loan portfolio, including growing real-estate investment and project financing mainly in the Netherlands (74%) but also abroad with some exposure to the US and Spanish markets (EUR 1.2billion). Although this portfolio is secured by collateral (real-estate assets), the deterioration of the economic environment is likely to negatively impact the portfolio value. Overall, Moody's cautions about the risk linked to the high level of industry concentration -- especially in the construction and property industries - in SNS Bank's loan portfolio in Dutch commercial and residential real-estate markets in the context of the current downturn.

Moody's added that the profitability of SNS retail bank deteriorated in 2008 notably due to decreasing interest income representing the bulk of its operating income (83% at end-June 2008). Its profitability, historically low due to its business mix, is further altered owing to funding costs that have significantly increased in the last two years. Although SNS Bank's deposit base widened in 2008, the bank's loan portfolio is only partially funded by deposits. Total wholesale funding amounted to 52% of total EUR 70billion at end-June 2008. Moody's indicates that the bank's lower level of profitability is providing a limited cushion in case of asset quality deterioration, which would require additional allowances against expected losses. Supporting the bank's financial position is the reinforced capital position following the capital injection of EUR 225 million achieved in November 2008 allowing for a greater buffer to absorb losses that may occur in the years to come. Finally, Moody's also notes that SNS Bank intends to rely upon long-term State guaranteed debt in 2009 with the aim of lengthening the bank's funding profile.

Moody's added that the rationale behind the change in outlook (from negative to stable) is that SNS Bank's higher risk profile and Moody's concerns on the bank's asset quality are captured in the assigned C BFSR. This already takes into account the bank's intention to limit the relative size of its property finance portfolio in the future and to improve the granularity of this portfolio.

In terms of the rating actions at the holding level, Moody's said that the revised Baa1 senior debt ratings at SNS Reaal N.V. continue to reflect the subordination of holding company creditors from the Group's main operating entities at SNS Bank and Reaal Verzekeringen The one-notch downgrade reflects the similar action taken at SNS Bank and the importance (approximately 45% in terms of earnings) of SNS Bank to the Group overall. Moody's added that, notwithstanding the negative outlook at Reaal Verzekeringen, the stable outlook at SNS Reaal N.V. reflects the stable outlook at SNS Bank and the stability of earnings resulting from the diversified sources of cash-flows that the holding company receives.

The latest rating action was on November 14, 2008 when Moody's affirmed all the ratings of the SNS REAAL Group and changed the outlook on these ratings to negative from stable. The short-term ratings were affirmed at Prime 1 for SNS Bank and Prime 2 for SNS Reaal.

The principal methodology used in rating SNS Bank were "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", which can be found at www.moodys.com in the Credit Policy and Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy and Methodologies directory.

Headquartered in Utrecht, SNS Bank has total assets of € 75,554 billion and reported shareholders' equity (including minority interest) of € 1,948 billion as of June 30th, 2008.

SNS REAAL is a bancassurance group headquartered in Utrecht, the Netherlands. Focusing on the Dutch market, it reported total income of EUR4.5 billion in 2007 and had shareholders' equity of EUR3.6 billion as of 31 December 2007.

LIST OF RATINGS, SNS Bank N.V, SNS Reaal N.V.

The following ratings were downgraded, outlook stable

SNS Bank N.V -- bank financial strength rating at C;

SNS Bank N.V -- senior unsecured debt rating and long term bank deposit rating at A2;

SNS Bank N.V -- subordinated debt rating at A3;

SNS Bank N.V. -- junior subordinated debt rating at A3/

SNS Bank N.V -- perpetual Tier 1 hybrid capital at Baa1;

SNS REAAL N.V. -- senior unsecured debt rating at Baa1;

SNS REAAL N.V. -- subordinated debt rating at Baa2;

SNS REAAL N.V. -- preferred stock rating at Baa3.

The following ratings were affirmed:

SNS Bank N.V. -- short term bank deposit rating and other short-term ratings at Prime-1;

SNS REAAL N.V. -- short-term rating at Prime-2.

Paris
Virginie Merlin
Vice President - Senior Analyst
Financial Institutions Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Reynold R. Leegerstee
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades SNS Bank LT ratings to A2 from A1, stable outlook
No Related Data.
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