Moody's rates Sberbank notes Baa2

Moody's Investors Service said it assigned a rating of Baa2 to the U.S. dollar-denominated issue of subordinated loan participation notes issued on a limited-recourse basis by UBS (Luxembourg) SA for the sole purpose of financing a subordinated loan to Sberbank.

The issue amount is not yet known, while the expected final maturity of the notes is 10 years. The outlook is positive.

Moody's stated that the Baa2 rating is based on the fundamental credit quality of Sberbank, the majority state-owned bank with a dominant position in the Russian banking sector, as reflected in its estimated market shares of 61.9% in retail deposits, 50.4% in retail loans, 32.1% in commercial loans and 28.8% in the total system's assets as of Sept. 30, 2004.

The rating also reflects the probability of a sovereign default implied by Russia's Baa3 foreign currency bond rating, and the likelihood that the Russian government could impose a debt moratorium in an event of default on its own foreign currency obligations, Moody's said. Additionally, the rating reflects the subordinated nature of payments from Sberbank under the loan agreement.

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