Deposit ratings affirmed at Baa3 with stable outlook

Moscow, July 03, 2009 -- Moody's Investors Service today downgraded its bank
financial strength rating (BFSR) of VTB Bank (Austria) (or VTBA), VTB
Capital plc (VTBC) and VTB Bank (France) (VTBF) to D- from D. The outlook on
the BFSRs is negative. All three banks are owned by the Russian Bank VTB
(rated D-/Baa1/Prime-2). At the same time, Moody's affirmed the banks' Baa3
long-term global local currency (GLC) deposit ratings, with a stable
outlook. The rating actions conclude the review process initiated in
February 2009, when the BFSR and deposit ratings of those banks were put on
review for a possible downgrade.

The negative outlook on these banks' BFSRs reflects our medium term
expectation that the operating environment in Russia and globally would
continue to negatively impact their financial fundamentals, particularly
capitalisation, asset quality, profitability and liquidity. The outlook on
the GLC deposit ratings is stable, reflecting Moody's expectation that
further lowering of the banks' BFSRs by one notch, if it happens, is
unlikely to result in the downgrade of the banks' deposit ratings.

The downgrade of the BFSRs mainly reflects the negative pressure on
financial fundamentals of these banks, stemming from their historically high
credit and market risk exposures to Russian counterparties. The severe
stress in the Russian economy is leading to a rapid deterioration in
borrowers' credit quality. As a result, we see a rapid increase in problem
loans and much weaker profitability metrics at VTBA, VTBC and VTBF. Higher
expected credit losses put additional stress on banks'
capital levels, due to the need to allocate new provisions.

These subsidiaries' D- BFSRs are now in line with the BFSR of VTB. The BFSRs
of all three banks are supported by their membership in the large VTB group,
which supports these banks through funding and capital, and facilitates
client and transaction origination. Although the three banks accounted for a
minor 10% of group assets, they play an important role in servicing foreign
transactions of the group and its clients in areas like trade finance (VTBA
and VTBF) and investment banking (VTBC). All three are closely supervised by
the parent bank.

More detailed considerations for the rating actions follow below.

VTBA's BFSR is pressured by a weaker Tier 1 capitalisation following the
consolidation of VTBF and VTB Bank Deutschland -- Tier 1 ratio deteriorated
to 8.3% at YE2008, from 10.5% at YE2007. The loan portfolio is concentrated,
with the 20 largest borrowers accounting for 150% of Tier 1 capital and
mostly composed of Russian and CIS companies (on a consolidated basis). We
estimate the share of problem loans to account for 6.7% of gross loans at
YE2008 (this ratio already includes a high share of legacy problem loans),
with a negative trend in 2009. Management expects impaired and restructured
loans to reach 15% at the maximum in the medium term. In addition, VTBA has
a large exposure to market and credit risks through CDS sold on Russian and
CIS counterparties, which accounted for ca. 100% of Tier 1 capital.

The BFSR on VTBC is negatively pressured by uncertainties over the impact of
the bank's new strategy -- focussing on investment banking and away from
wholesale banking, on its franchise value and risk profile. Although we
acknowledge that the bank is making good progress in building the necessary
managerial, operational and risk infrastructure for an investment bank, as
well as inking high-profile deals, this strategic repositioning leads to
high execution risk. VTBC's financial fundamentals are under pressure: Tier
1 capitalisation dropped to 10% at YE2008, from 25% in 2007, following a
rapid increase in risk assets and a large net loss. However in 2008 VTBC
received US$250 million in Tier 1 capital and US$600 million in upper Tier
2, which brought its total CAR back to 20.1% at YE2008, the same level as in
2007. Although the quality of VTBC's capital base has weakened because of a
larger Tier 2 component than previously, overall CAR remains strong. The
share of impaired loans in the bank's portfolio increased substantially in
2008, to 10% of gross loans at year-end. Moody's notes that credit risk
concentration is very high with the top 20 corporate loans exceeding 230% of
Tier1 capital at YE2008; those are legacy loans, however, with no new
origination in line with new strategy.

The BFSR on VTBF is impacted by asset quality deterioration. At YE2008,
problem loans accounted for around 7% of total exposure to banks and
customers. The bank also has large single party concentrations, with the 20
largest borrowers exceeding 200% of Tier 1 capital. Although VTBF is a
strongly capitalised bank compared to VTBA and VTBF (with total capital
funds covering 70% of assets), we still believe that higher loan loss
provisions would impact its capital base, however without materially
affecting Tier 1 capitalisation -- which stood at 13.6% at YE2008.

The banks' long-term global local currency (GLC) deposit ratings were
affirmed at Baa3, based on their baseline credit assessments (BCA) of Ba3
and VTB's supported rating (Baa1; this rating incorporates Moody's view of
the very high likelihood of support for VTB and its subsidiaries from the
Russian government). According to Moody's joint default analysis
(JDA) methodology, in most cases when incorporating parental support into
bank ratings of a foreign subsidiary, we use the parent's stand-alone rating
(Ba3 in case of VTB) - that is, the rating without benefit of any systemic
support - to determine the parent's ability to support its foreign bank
subsidiaries. However, in case of VTBA, VTBC and VTBF, we used the parent's
supported rating (Baa1), to reflect our opinion that these foreign
subsidiaries are very likely to indirectly benefit from systemic support
provided by the Russian government to VTB. We base our opinion on a track
record of support to these banks from the Russian government and its bodies.

Moody's believes that these banks are unlikely to receive systemic support
from their domicile countries (UK, France and Austria); therefore their
deposit ratings only benefit from support from VTB and the Russian
government, resulting in three notches of uplift above their stand-alone
BCAs of Ba3.

Moody's previous rating action on VTBA, VTBC and VTBF was implemented on
24 February 2009, when the BFSRs and deposit ratings on all three banks were
placed on review for possible downgrade.

The principal methodologies used in rating VTBA, VTBC and VTBF are "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 & Methodologies
directory, in the Ratings Methodologies subdirectory. Other methodologies
and factors that may have been considered in the process of rating these
banks can also be found in the Credit Policy & Methodologies directory.

VTBA is headquartered in Vienna. At YE2008, it reported consolidated assets
of EUR5.3 billion (year-end 2007: EUR4.1 billion). The bank posted a net
loss of EUR5 million for 2008, versus net income of EUR25 million for 2007.

VTBC is headquartered in London. As at YE2008, it reported total assets of
GBP5.2 billion under IFRS (x2.15 increase over 2007). However, the majority
of this increase relates to short-term interbank assets with investment
grade developed-market banks which arose as the result of the implementation
of a defensive liquidity strategy by VTBC. The bank posted a net loss of
GBP140 million under IFRS for 2008 (2007: net income of
GBP26 million).

VTBF is Paris-based. At YE2008, it reported unconsolidated total assets of
EUR 1.1 billion (2007: EUR 1.1 billion). As in previous years, the net
result of VTBF was nil in 2008, as all the after tax result has been
allocated to the replenishment of a subordinated loan. Before this
allocation, VTBF generated EUR30 million profit for 2008 (2007: EUR54
million).