TEXT-Fitch cuts Bank Zachodni WBK, affirms Kredyt Bank

June 14 - Fitch Ratings has downgraded Bank Zachodni WBK S.A.'s
(BZ WBK) Long-term Issuer Default Rating (IDR) to 'BBB' from 'A-'. The Outlook
is Stable. The agency has also affirmed BZ WBK's Viability Rating (VR) at 'bbb'
and removed it from Rating Watch Negative (RWN). At the same time, Kredyt Bank's
(KB) Long-term IDR has been affirmed at 'BBB' and removed from Rating
Watch Positive (RWP). A full list of rating actions is at the end of this
commentary.

The rating actions follow the downgrade of BZ WBK's parent Banco Santander
(Santander, 'BBB+'/Negative) and Fitch's assessment of the credit profile of the
entity emerging from the planned merger of BZ WBK and KB. In Fitch's view the
recent downgrade of Santander (see 'Fitch Downgrades Santander & BBVA to
'BBB+'/Negative Outlook on Sovereign Action', dated 11 June 2012 on
www.fitchratings.com) reduces its ability to provide support to BZ WBK and the
merged bank. However, Fitch believes that Santander's propensity to provide
support remains high, given the strategic importance of Polish banking
operations to Santander.

BZ WBK's IDRs are now based on the bank's intrinsic strength reflected in its VR
of 'bbb'. The affirmation of BZ WBK's VR and the Stable Outlook on its Long-term
IDR reflect Fitch's view that the merged entity's stand-alone credit profile
would be broadly in line with BZ WBK's current VR, albeit marginally weaker as a
result of the incorporation of KB.

The merged bank would become the third-largest bank in Poland. The stronger
franchise and greater scale create the potential for improved efficiency. Based
on end-2011 data the merged bank would have a loan to deposit ratio of around
93% and liquidity position able to easily absorb changes in the funding
structure stemming from the need to gradually replace direct funding from KBC.
The reported impaired loans ratio for the merged bank would still be below
market average (6.7% vs 7.3%), albeit moderately weaker than for BZ WBK.
Provision coverage of impaired exposures would remain at a reasonable level with
the uncovered part at a moderate 18% of Fitch Core Capital (FCC).

The merger would result in reduced exposure to commercial real estate relative
to Fitch core capital. The exposure to foreign currency-denominated mortgages
would increase to around 22% of total gross loans, but would still be much lower
than for local peers with VRs at 'bbb-'. Capitalization of the merged bank would
be solid, with a FCC ratio at around 13.4%. The planned capital injection of
around PLN332m from EBRD, would increase FCC ratio by an additional 45bp.

Within Fitch's base case scenario, BZ WBK's ratings will not be impacted by any
further possible downgrade of Santander's Long-term IDR, given the agency's view
of only moderate contagion risk for BZ WBK from negative developments at
Santander. BZ WBK's ratings would only be likely to come under negative pressure
if Santander is downgraded to sub-investment grade, which Fitch does not
anticipate at present.

An upgrade of BZ WBK's VR and IDRs is unlikely in the short to medium term,
given the challenges of integrating KB, the moderate negative impact of the
merger and pressure on Santander's credit profile. BZ WBK could be downgraded if
there is further escalation of the eurozone crisis, which could result in
increased impairment charges due to a less supportive operating environment.
Fitch notes that a further marked deterioration in the credit profile of Spain
and Santander could also give rise to somewhat greater contagion risk for BZ
WBK, and may increase execution risks related to the planned merger.

The affirmation of KB's Long-term IDR and removal from RWP reflects Fitch's view
that the merged bank's IDR will likely be at the same level as KB's current IDR,
which is driven by support from KB's parent KBC ('A-'/Stable). The RWP on KB's
VR continues to reflect Fitch's view that the VR is likely to be upgraded as a
result of the merger. According to the initial timetable, the merger is
expected to be completed no earlier than Q412.

The rating actions are:

BZ WBK

Long-term foreign currency IDR: downgraded to 'BBB' from 'A-', Outlook Stable

Short-term foreign currency IDR: downgraded to 'F3' from 'F2'

Viability Rating: affirmed at 'bbb', removed from RWN

Support Rating: downgraded to '2' from '1'

KB

Long-term foreign currency IDR: affirmed at 'BBB', removed from RWP; assigned
Stable Outlook

Short-term foreign currency IDR: affirmed at 'F3', removed from RWP

Viability Rating: 'bb+', remains on RWP

Support Rating: affirmed at '2', removed from RWP

Additional information is available at www.fitchratings.com.

The ratings above were solicited by, or on behalf of, the issuer, and therefore,
Fitch has been compensated for the provision of the ratings.

Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 16
August 2011, 'Rating Foreign Banking Subsidiaries Higher Than Parent Banks or
Bank Holding Companies', dated 12 June 2012, are available at
www.fitchratings.com.

Applicable Criteria and(New York Ratings Team)