FITCH AFFIRMS LARGE AUSTRIAN BANKS AT 'A'; OUTLOOK NEGATIVE Fitch Ratings-Frankfurt/London-07 August 2014: Fitch Ratings has affirmed the Long-term Issuer Default Ratings (IDR) of Erste Group Bank AG (Erste), Raiffeisen Bank International AG (RBI), UniCredit Bank Austria AG (Bank Austria) and Volksbanken-Verbund (VB-Verbund) at 'A'. The Outlooks are Negative. At the same time, Fitch has downgraded Erste's Viability Rating (VR) to 'bbb+' from 'a-' and affirmed the VRs of RBI at 'bbb', Bank Austria at 'bbb+' and VB-Verbund at 'bb-'. Fitch has also affirmed VB-Verbund's central institution, Oesterreichische VolksbankenAktiengesellschaft's (OeVAG) Long-term IDR at 'A' with a Negative Outlook. VB-Verbund is not a legal entity but a network of cooperative of banks, including OeVAG. As such, Fitch has assigned group ratings to OeVAG and the other member banks of VB-Verbund, under Fitch's rating criteria for banking structures backed by mutual support mechanisms. Based on these criteria, Fitch does not assign a VR to OeVAG or the other member banks. A full list of rating actions is at the end of this rating action commentary. A report entitled 'Peer Review: Major Austrian Banks' will be published shortly. KEY RATING DRIVERS - IDRS, SUPPORT RATINGS, SUPPORT RATINGS FLOORS AND SENIOR DEBT The IDRs of all four banks are at their Support Rating Floors (SRFs) of 'A' and reflect Fitch's view that as systemically important banks in Austria, extraordinary support from the Republic of Austria (AAA/Stable) would be available if needed. VB-Verbund, Bank Austria and Erste have significant domestic deposit market shares (7%, 14% and 18%, respectively). RBI does not have a large domestic deposit franchise but is an integral part of Raiffeisen Banking Group (RBG), Austria's largest banking group. Despite its smaller domestic franchise, VB-Verbund is likely to be seen as systemically important by the Austrian authorities as its network covers more rural areas where fewer alternative options are available. The Negative Outlook on the Long-term IDRs reflects Fitch's view that there is a clear intention to reduce implicit state support for banks in the EU. This is demonstrated by a series of legislative, regulatory and policy initiatives, in particular the EU's Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism (SRM) for eurozone banks. We expect these regulatory developments to ultimately dilute the Austrian government's influence in deciding how Austrian banks are resolved. We expect this to increase the likelihood of losses for senior debt investors if the banks fall foul of solvability assessments. The ad-hoc legislation submitted by the Austrian government in 2Q14 to bail in some of Hypo Alpe-Adria International AG's (HAA, not rated) subordinated debt also supports our expectation that the government's willingness to support is gradually decreasing. At the same time, we believe that the government's changing approach to HAA's support is guided by the bank's specific situation and does not imply increased bail-in risk for Erste, RBI, Bank Austria and VB-Verbund in the short term. RATING SENSITIVITIES - IDRS, SUPPORT RATINGS, SRF AND SENIOR DEBT The Support Ratings (SRs) and SRFs, and thus the IDRs and senior debt ratings, are sensitive to further progress with the BRRD's and the SRM's implementation. The directive requires 'bail in'

of creditors by 2016 before an insolvent bank can be recapitalised with state funds. A functioning SRM and progress on making banks 'resolvable' without jeopardising the wider financial system are areas of focus for eurozone policymakers. Once these are operational, they will become an overriding rating factor, as the likelihood of the banks' senior creditors receiving full support from the sovereign will diminish substantially notwithstanding the banks' systemic importance. Consequently, we expect to revise Erste, Bank Austria and RBI's SRs to '5' and their SRFs to 'No Floor' by end-2014 or 1H15. This is likely to trigger a downgrade of their Long-term IDRs to the level of their VRs, implying a two-notch downgrade (to BBB+) of Erste and Bank Austria's Longterm IDRs and a downgrade of their Short-term IDRs to 'F2'. RBI's Long-term IDR would likely be downgraded to 'BBB' (and its Short-term IDRs to 'F2' or 'F3') unless this was mitigated by Fitch's assessment of the availability of institutional support from RBG. The Long-term IDRs and Outlooks would then become sensitive to the same factors as the VRs. It is also likely that we will revise VB Verbund's SRF to 'No Floor,' meaning that its IDRs would be downgraded to the level of its VR. Based on VB Verbund's current VR this would imply a seven-notch downgrade of its Long-term IDR to 'BB-' and a downgrade of its Short-term IDR to 'B'. However, depending on events and indications between now and the timing of rating actions on support-driven ratings, we may retain some state support in VB Verbund's ratings. This would be primarily driven by OeVAG's 43% state-ownership and the fact that OeVAG will remain too large for the rest of the mutual group to support on its own until it has wound down its non-core assets. We believe that Austria will want to protect its investment until that point. A sale of the state's holding in OeVAG to a party outside VB Verbund would also face some political challenges. OeVAG's ratings are sensitive to the same factors as VB Verbund's. KEY RATING DRIVERS - VRs The VRs of Erste, RBI and Bank Austria share the following drivers: - We view the three banks' operating environment as solid overall. All three banks have healthy market shares in several Central and Eastern European (CEE) markets, in addition to good domestic commercial banking franchises for Erste and Bank Austria. The resulting risk diversification mitigates the impact of negative developments in single markets. - We view the three banks' management capabilities, execution and strategic positioning as comparable and solid and with modest positive implications for their VRs. The three banks' similar dual positioning in Austria and CEE results in comparable risk appetites in our view. - At the same time, all three banks currently have a strong reliance on profit contributions from one or two single CEE markets, which dilutes the benefits of their portfolio diversification. Overall performance is negatively affected to varying degrees by currency depreciation, recurring low margins in Austria, high loan impairment charges in some CEE markets and poor loan growth in CEE and Austria, with Erste currently the most affected and Bank Austria the most resilient. Adverse legislative actions (notably in Hungary) and sizeable bank levies also burden profitability. - Asset quality remains weak in several CEE markets, notably Hungary and Romania. Some areas of the domestic corporate loan book are also subject to asset quality pressure, although this is not a major weakness given Austria's robust economy. - Their funding and liquidity profiles are characterised by good and improving local deposit franchises and large unencumbered liquidity buffers. - Their adequate risk-weighted capitalisation is in line with general market expectations for large universal banks, and high regulatory risk weights in CEE result in generally solid leverage ratios. The

banks' moderate internal capital generation could somewhat constrain their ability to strengthen their risk-weighted capital in line with increasing market expectations, but this is sufficiently mitigated by their access to shareholder capital or the equity market. The downgrade of Erste's VR to 'bbb+' from 'a-' largely reflects the bank's weak performance since 2013 and uncertain medium-term prospects of recovery to a stable level of performance more commensurate with both the 'a' category and the bank's solid long-term track record. The net loss of EUR1.4-1.6bn expected by Erste in 2014 is largely inflated by one-off items with neutral implications for the bank's regulatory capital and Fitch's core capital assessment. However, high recurring LICs (mostly in CEE) have absorbed a large share of its pre-impairment profits for several years, also compared with its immediate peers, leading to modest underlying profitability, including in 1H14. Erste's successive profit warnings in the past few quarters reflect higher earnings volatility mainly driven by one-off adjustments in Romania and Hungary. While this reduces the risk of future negative revaluations especially in Romania, it also suggests lower earnings visibility than we would normally expect from issuers in the 'a' category. This is partly mitigated by Erste's stronger focus on lowerrisk markets (Austria, the Czech Republic and Slovakia) than RBI and Bank Austria. Erste's VR also benefits from a more resilient funding and liquidity profile than its peers thanks to its strong deposit franchises in its most stable markets, limited wholesale funding needs and a large liquidity buffer. Erste is present in fewer CEE markets than RBI and Bank Austria but has solid market shares in all of its markets except Serbia. Whilst overall NPL coverage is adequate and asset quality is broadly stable, asset quality in Romania, Hungary and, to a lesser extent, Croatia remains weak. We view RBI's company profile as slightly weaker than Erste's and Bank Austria's due to its less developed retail franchise in stable mature markets and generally higher exposure than its peers to vulnerable CEE markets, although this has not yet translated into materially weaker asset quality. RBI significantly strengthened its capital position with its large capital increase in 1Q14, bringing its fully-loaded Basel III CET1 ratio to 9.9% at end-1Q14, in line with peers and general market expectations. This positive factor is offset by the bank's particularly strong reliance on profits from its Russian unit and a still sizeable (albeit shrinking) exposure to the Ukrainian market, which is currently compounded by the uncertain consequences of the geopolitical tensions in the region. Large exposures to the Ukrainian and Russian markets could also put significant pressure on Bank Austria's VR if the situation in these countries deteriorated, albeit less so than for RBI in relative terms. Bank Austria's performance is also currently stronger and more stable than its peers'. Similar to RBI, its higher reliance on wholesale funding relative to Erste is mitigated by its access to contingent funding sources from its parent, UniCredit S.p.A. (BBB+/Negative) in case of need. VB-Verbund's VR primarily reflects legacy asset quality weaknesses at its central institution OeVAG. OeVAG has made progress in implementing its restructuring plans, shrinking its higher-risk non-core asset portfolio to EUR7.1bn at end-2013 or 34% of OeVAG's total assets (excluding consolidation effects; end-2012: EUR10.8bn; 39%). However, its exposure to higher risk segments, in particular its CEE corporates and commercial real estate exposure, remains significant. The bank disposed of further higher risk assets in 1H14 but targeted significant future disposals are sensitive to market sentiment. VB Verbund's current capitalisation is acceptable but has to be viewed in light of OeVAG having to repay EUR300m of state participation capital in the short term and reducing the state's 43% stake in the long term. Should VB-Verbund need to raise more capital, for instance as a result of the EBA stress test outcome in 4Q14, the bank may need to rely on state capital support because VB-Verbund's flexibility in raising capital on its own is limited, in our view.

RATING SENSITIVITIES - VR A further downgrade of Erste's VR could result from a further unexpected deterioration in Hungary, Croatia or Romania or from the Romanian operations' failure to confirm their recovery. We recognise the positive profitability trend in 1H14 of the domestic retail business at the savings banks majorityowned by Erste, but the profit contribution of the non majority-owned, non-profit-maximising savings banks remains structurally weak. Generally, evidence of Erste's focus on lower-risk markets and its strong Austrian franchise translating into more robust and resilient profits would be necessary before we considered upgrading the VR back to the 'a' range. The bank would also need to become less reliant on profits from its Czech operations, in particular through a better profit contribution from Romania and more effective cost management in Austria, notably at the Austrian savings banks. Improvement in asset quality in Hungary, Romania and Croatia would also be positive for the VR. The tail risk arising from RBI's reliance on its profitable Russian unit currently constrains the bank's VR upside. Sustainably easing Ukraine-related tensions without material asset quality or profit deterioration could support a higher VR. Conversely, a material deterioration of the Ukrainian/ Russian situation could put the VR under pressure. However, this is not our base case scenario. In addition to similar drivers to RBI, Bank Austria's VR could also be affected by significant deterioration in the credit quality of its parent bank and a resulting diversion of liquidity and/or capital from Bank Austria although Fitch does not consider this likely. Upside potential will remain limited until the bank proves able to generate better earnings from its domestic operations and those in more stable markets. VB-Verbund's VR is primarily sensitive to further negative developments at OeVAG. The short-term challenge of repaying OeVAG's EUR300m remaining state participation capital, and the longer-term challenge of the government reducing its 43% stake in OeVAG are putting VB-Verbund's VR under pressure. There is some upside potential for the VR in the medium term if OeVAG is able to dispose of its remaining legacy CEE assets and can demonstrate a more stable performance track record following its restructuring. Negative rating action could be triggered by further significant losses within OeVAG, most likely due to declining asset values and slower than expected restructuring progress. KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and other hybrid capital issued by Erste are notched down from the bank's VR in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably. The Lower Tier 2 debt is notched once for loss severity. The Upper Tier 2 debt is notched twice for non-performance and once for loss severity. RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES The ratings of Erste's subordinated and hybrid capital securities are primarily sensitive to any change in Erste's VR. The rating actions are as follows: Erste Group Bank AG Long-term IDR: affirmed at 'A'; Outlook Negative Short-term IDR: affirmed at F1' Viability Rating: downgraded to 'bbb+' from 'a-' Support Rating: affirmed at '1' Support Rating Floor: affirmed at 'A' Senior unsecured notes: affirmed at 'A'/'F1' Lower Tier 2 debt: downgraded to 'BBB' from 'BBB+' Upper Tier 2 debt: downgraded to 'BB+' from 'BBB-'

Erste Finance (Delaware) LLC: USD10bn commercial paper programme, guaranteed by Erste: affirmed at 'F1' Raiffeisen Bank International AG Long-term IDR: affirmed at 'A'; Outlook Negative Short-term IDR: affirmed at F1' Viability Rating: affirmed at 'bbb' Support Rating: affirmed at '1' Support Rating Floor: affirmed at 'A' UniCredit Bank Austria AG Long-term IDR: affirmed at 'A'; Outlook Negative Short-term IDR: affirmed at F1' Viability Rating: affirmed at 'bbb+' Support Rating: affirmed at '1' Support Rating Floor: affirmed at 'A' Senior unsecured notes: affirmed at 'A' Volksbanken-Verbund Long-term IDR: affirmed at 'A'; Outlook Negative Short-term IDR: affirmed at 'F1' Viability Rating: affirmed at 'bb-' Support Rating: affirmed at '1' Support Rating Floor: affirmed at 'A' OeVAG Long-term IDR: affirmed at 'A'; Outlook Negative Short-term IDR: affirmed at 'F1' Support Rating affirmed at '1' Support Rating Floor: affirmed at 'A' Market linked securities: affirmed at 'Aemr' Senior unsecured notes: affirmed at 'A'/'F1' The Long-term IDRs of the other VB-Verbund member banks' have been affirmed at 'A' with Negative Outlook and Short-term IDRs at 'F1'. These ratings are "group" ratings assigned under Fitch's rating criteria for banking structures backed by mutual support mechanisms and are sensitive to the same drivers as VB-Verbund's Long-term IDR. The ratings of the following members of VB-Verbund have been affirmed: Allgemeine Bausparkasse reg.Gen.m.b.H. Bank fuer Aerzte und Freie Berufe AG Gaertnerbank reg.Gen.m.b.H. IMMO-BANK AG Oesterreichische Apothekerbank eG SPARDA-BANK AUSTRIA Nord eGen SPARDA-BANK AUSTRIA Sued eGen Volksbank Almtal e. Gen. Volksbank Alpenvorland e.Gen. Volksbank Bad Goisern eingetragene Genossenschaft Volksbank Bad Hall e.Gen. Volksbank Donau-Weinland reg.Gen.m.b.H. Volksbank Eferding - Grieskirchen reg.Gen.m.b.H. Volksbank Enns - St.Valentin eG Volksbank Obersteiermark eGen

Volksbank Feldkirchen eG Volksbank Fels am Wagram e.Gen. Volksbank Strasswalchen-Voecklamarkt-Mondsee eGen Volksbank fuer den Bezirk Weiz reg.Gen.m.b.H. Volksbank fuer die Sued- und Weststeiermark eG Volksbank Gmuend eingetragene Genossenschaft VOLKSBANK Graz-Bruck e. Gen. Volksbank Kaernten Sued e.Gen. Volksbank Krems-Zwettl AG Volksbank Kufstein-Kitzbuehel eG Volksbank Laa eGen Volksbank Landeck eG Volksbank Linz-Wels-Muehlviertel AG Volksbank Marchfeld e.Gen. Volksbank Niederoesterreich Sued eG Volksbank Oberes Waldviertel reg.Gen.m.b.H. Volksbank Oberkaernten reg.Gen.m.b.H. Volksbank Oberndorf reg.Gen.m.b.H. Volksbank Obersdorf - Wolkersdorf - Deutsch-Wagram e. Gen. Volksbank Ost reg.Gen.m.b.H. Volksbank Osttirol-Westkaernten eG Volksbank Oetscherland eG Volksbank Ried im Innkreis eG Volksbank Salzburg eG Volksbank Schaerding eG Volksbank Steirisches Salzkammergut reg.Gen.m.b.H. Volksbank Suedburgenland eG Volksbank Sued-Oststeiermark e.Gen. Volksbank Tirol Innsbruck - Schwaz AG Volksbank Tullnerfeld eG Volksbank Voecklabruck-Gmunden e.Gen. Volksbank Vorarlberg e. Gen. Volksbank Weinviertel e.Gen. Volksbank Wien-Baden AG Volksbank, Gewerbe- und Handelsbank Kaernten AG Waldviertler Volksbank Horn reg.Gen.m.b.H. Spar- und Vorschuss-Verein der Beamtenschaft der Oesterreichischen Nationalbank reg.Gen.m.b.H. Spar- und Vorschussverein "Graphik" reg.Gen.m.b.H. Spar- und Vorschussverein der Mitarbeiter der Niederoesterreichischen LandesbankHypothekenbank AG, reg.Gen.m.b.H. Spar- und Vorschusskasse der Angestellten der "Wiener Staedtische Versicherung AG Vienna Insurance Group" e.Gen. The IDRs of the following members of Volksbanken Verbund have been affirmed at 'A'/ Negative/'F1+' and withdrawn as a result of their mergers into other rated members of the group: Volksbank Aichfeld-Murboden reg.Gen.m.b.H. Volksbank Altheim-Braunau reg.Gen.m.b.H. Volksbank Gailtal eG Volksbank Niederoesterreich-Mitte e.G. Volksbank Voecklamarkt-Mondsee reg.Gen.m.b.H. Volksbank Baden e.Gen. Volksbank Muerztal-Leoben e.Gen. Contact:

Primary Analyst Patrick Rioual Director +49 69 76 80 76 123 Fitch Deutschland GmbH Taunusanlage 17 60325 Frankfurt am Main Secondary Analyst (Erste, RBI, Bank Austria) Erwin van Lumich Managing Director +34 93 323 8403 Secondary Analyst (Volksbanken-Verbund, OeVAG) Krista Davies Associate Director +44 20 3530 1579 Committee Chairperson Artur Szeski Senior Director +48 22 338 6292 Media Relations: Elaine Bailey, [email protected].

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