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Fitch upgrades Ak Bars Bank's rating to BB-

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MOSCOW, February 5 (RIA Novosti) - Fitch Ratings has upgraded Russian Ak Bars Bank's ratings to Issuer Default 'BB-', from 'B+', Support '3' from '4' and National Long-term 'A+' from 'A-(A minus)(rus)' with a stable outlook, the international ratings agency said Monday.

Fitch said it affirmed the Tatarstan-based bank's other ratings at Short-term 'B' and Individual 'D'.

"The upgrades follow the Republic of Tatarstan's ("RT") upgrade on 05 February 2007, to IDR 'BB+'/Stable Outlook from 'BB' and National Long-term 'AA+(rus)'/Stable Outlook from 'AA(rus)', and therefore the higher ability of RT to provide support to Ak Bars in case of need," Fitch said.

"RT [Republic of Tatarstan] would have a strong propensity to support Ak Bars in light of its controlling ownership, the servicing by Ak Bars of the RT budget, the bank's extensive retail franchise in the republic (1.4 million retail depositors) and AK Bars' importance to the republic's banking system," the agency said.

In December 2006, the government retained a majority interest in the bank after the equity increase by 11.2 billion rubles ($423 million).

"The Individual rating reflects Ak Bars' significant loan book concentrations, rapid loan growth, sizable related-party funding and ambitious expansion plans, which could elevate the bank's risk profile. However, the rating also takes into account improving bottom-line results, currently strong capitalization, good asset quality, and large shares in the local retail and corporate sectors," Fitch said.

"Ak Bars was founded by the Tatarstan government in 1993. It is the largest bank in the republic by assets and is among the largest 20 banks in Russia. The RT indirectly controls a large majority of the bank's shares. Ak Bars is diversifying its franchise into the retail market and rapidly expanding its loan portfolio outside the republic," the agency said.

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