- Moody's downgrades Kaupthing Bank's credit rating to A1


Moody's Investors Service has today downgraded Kaupthing Bank's credit ratings.
The Bank's long-term deposit and senior debt ratings in local and foreign
currencies have been downgraded one notch from Aa3 to A1 and the Bank's
Financial Strength Rating from C to C-. 
 
The Bank's rating for short-term obligations in local and foreign currencies,
P-1, which is the highest short-term rating given by Moody's, remains
unchanged. 

The outlook on all ratings is stable.
 
According to Moody's, Kaupthing's recurring earnings power and capital adequacy
weakened in 2007 from previously strong levels, and the Bank's business model
remains reliant on investment banking and capital markets activities, both of
which Moody's expects to prove challenging over the coming years. The adverse
shift in market conditions may put downward pressure on the Bank's capital
adequacy assuming moderate asset growth. 

Moody's notes that Kaupthing's liquidity profile and cash position is strong,
and the announced asset sale by Kaupthing Singer & Friedlander is also viewed
positively in terms of liquidity. Even though the rating agency expresses
concerns with regard to asset quality, it notes that it has conducted several
stress tests on Kaupthing's loan portfolio, subjecting it among other things to
different defaults, which showed that Kaupthing can withstand substantial
downward pressure. 

See link below:
http://www.kaupthing.com/Investors/Ratings/Moody's


Further information:
Gudni Adalsteinsson - Chief Treasurer, + 354 444-6126
Jónas Sigurgeirsson - Chief Communications Officer, +354 444-6112