Moody's says that the negative outlook reflects (1) the bank's weakening financial performance, as reflected in declining profitability and asset quality pressure; and (2) the integration risks and uncertainties associated with the announced merger with UniCredit Czech Republic.

RATINGS RATIONALE

--- WEAKENING FINANCIAL PERFORMANCE

During the first nine months of 2012, UniCredit Slovakia reported a 43% year-on-year decline in net income to EUR12.9 million (or 0.5% of risk weighted assets). This was mainly a result of (1) a 58% increase in loan-loss provisioning; (2) a 10% reduction in net interest income; and (3) a 10% increase in operating costs, driven mainly by the newly introduced bank levy. The decline in the net interest income was due to a combination of lower revenues affected by the low interest rate environment and higher funding costs due to intensifying price-driven deposit competition.

Moody's notes that the bank recorded non-performing loans (NPLs) equal to 3.98% of gross loans in Q3 2012. However, the improvement relative to the NPL ratio of 7.5% in June 2012 is solely due to the bank selling a large NPL, for which, post-disposal, it retains a significant off-balance-sheet exposure. In addition, the bank's coverage ratio of on and off-balance-sheet NPLs (44.2% in Q3 2012), although increased year-on-year, remains well below the 78.2% average for the banking system in Slovakia. Moody's believes that further provisioning expenses might be needed because the bank's focus on corporate lending (71% of the loan book as of Q3 2012) -- a worse-performing asset class relative to retail lending in Slovakia -- exacerbates the bank's asset-quality pressures. In addition, Moody's notes that the bank's very high corporate borrower concentrations exposes the bank to significant asset-quality risks.

Moody's therefore expects that lower income, the introduction of a bank levy and pressure on loan loss provisioning will continue to suppress the bank's profitability for the rest of 2012 and in 2013.

Moody's says that it continues to view the bank's capitalisation as satisfactory, with a capital adequacy ratio of 14.6% as of September 2012. In addition, the deposit ratings continue to benefit from Moody's view of a high probability of parental and systemic support, resulting in a two-notch uplift from its standalone credit assessment of ba1 to its Baa2 long-term deposit ratings.

--- INTEGRETATION RISKS AND UNCERTAINTIES ASSOCIATED WITH THE ANNOUNCED MERGER

In November 2012, the board of Italy'sUnicredit SpA (Baa2 deposits negative; BFSR C-/BCA baa2 negative) approved a plan to merge its subsidiaries in the Czech Republic and Slovakia into a single cross-border bank headquartered in the Czech Republic. The integration is said to be primarily driven by the search of cost synergies, as well as better capital and liquidity management within the group. The integration is subject to the approval by the Czech and Slovak central banks, and the Unicredit group plans to complete the transaction by the end of 2013. Whilst longer-term Moody's acknowledges that the merger could have some positive implications for the newly established Czech-based bank, in the short to medium term, Moody's believes there are integration challenges and regulatory uncertainties associated with the merger of the two banks, as well as potential risk that the market position in Slovakia could weaken following the transformation of the subsidiary into a branch network.

WHAT COULD MOVE THE RATINGS UP/DOWN

Given the negative outlook, upwards pressure on standalone credit assessment and the long-term deposit ratings is unlikely. However, Moody's says that upwards pressure on these ratings could develop from (1) a substantial and sustainable improvement in the financial performance of the bank; and (2) a significant reduction in corporate borrower concentrations. Downwards pressure on the standalone credit assessment and deposit ratings could result from further deterioration of the bank's financial performance and weakening franchise in Slovakia. In addition, downwards rating pressure on Unicredit SpA's ratings and/or Slovakia's government debt ratings could affect Unicredit Slovakia's deposit ratings.

The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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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Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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Simone Zampa Vice President - Senior Analyst Financial Institutions Group Moody's Italia S.r.l Corso di Porta Romana 68 Milan 20122 Italy Telephone:+39-02-9148-1100 Yves J Lemay MD - Banking Financial Institutions Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Italia S.r.l Corso di Porta Romana 68 Milan 20122 Italy Telephone:+39-02-9148-1100(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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