Moody's downgrades rating of apoBank

by one notch; short-term rating remains unchanged

16.11.2007

Moody's Investors Service announced in a press release today a rating downgrade of Deutsche Apotheker- und Aerztebank ("apoBank").

The unsecured deposit and debt ratings of apoBank were downgraded to A2 from A1 and its bank financial strength rating ("BFSR") to C from C+. In line with this the rating for apoBank's senior and junior subordinated debt, including upper tier 2 instruments ("Genussscheine") is now at A3 respectively the rating for Tier 1 hybrid capital securities (silent participations / "Stille Einlagen") at Baa1. The Prime-1 short-term rating was affirmed.

Reason for the rating downgrade is apoBank's restructuring measures of its fund investments. In light of the global financial crisis and the consequently pressurized valuation of structured finance, apoBank decided to restructure its fund investments to ensure funding and to become independent from the current irrational market situation.

These restructuring measures were successfully implemented in compliance with a strictly defined framework of capital, liquidity and an economically reasonably acceptance of risk. Therewith the risk of the investments is based again on the high quality of the underlying assets of these funds. All underlying assets are rated with AAA. There was neither a downgrade nor were tranches put on "negative watch". Due to the high creditworthiness, still no defaults were to be expected.

Although Moody's honours that apoBank has restructured its investment in funds successfully, the ratings were placed on review. In light of the continuing uncertainties in the credit markets, the review will focus chiefly on the additional risks regarding apoBank's liquidity, earnings and capital situation.

Moody's notes positively that apoBank continues to enjoy a robust and positive development of its core lending business with medical professions which underpins the stability of the banks core franchise. Moreover, Moody's sees apoBank's on-balance sheet and hidden reserves offer some cushion against the increased market risk.

ApoBank repeatedly pointed out that temporary price fluctuations on securities could almost be compensated for by operating earnings. Despite persistent turmoil in the financial markets, from today's point of view the planned balance sheet profit and therewith the dividend would remain unaffected.