Moody´s affirms Banco Itau Europa ratings on BankBoston announcement

London - Moody's Investors Service day 7, affirmed the Baa1 long-term, Prime-2 short-term deposit ratings and the C- financial strength rating of Banco Itaú Europa, S.A. ("BIE"), with stable outlook, following the announcement that BIE has reached an agreement to acquire Miami-based BankBoston International, Nassau-based BankBoston Trust Company Limited ("BkBI", not rated) and Cayman-based BankBoston Trust Company (not rated) from Bank of America Corporation (Aa2/P-1).

In affirming the ratings, the rating agency said that it views the acquisition positively and that the bank's credit profile should benefit from the resulting expansion of its private banking operations, with its private banking client base more than doubling in size. According to Moody's, the deal - which will also provide BIE with a good platform for the development of cross-border business - will materially contribute to further reduce the weight of its concentration on a wholesale business focussed on intermediating trade and investment flows with Brazil, a factor that is reflected in our current ratings.

Nonetheless, Moody's noted the sizeable nature of the proposed operation, with a total value equivalent to approximately 20% of BIE's total capital funds and over twice its net profit. Given that the BkBI brand is excluded from the agreement, the rating agency believes it may be difficult for the bank to retain and manage its newly enlarged client base. This acquisition may also pose some additional challenges - chiefly in managing and controlling activities that are not only of a material dimension compared to BIE's current profile but are also based overseas, concerns that are partly mitigated by the fact that the bank has some recent experience in integrating private banking activities, and is part of the Itau group that has a good track record of acquisitions.

The deal is subject to approval by the Portuguese central bank and other international authorities and is expected to close in April 2007.

Moody's said that BIE's ratings could be pressured upwards in the event that it clearly manages to strengthen its franchise and of a reduction in the weight of its wholesale business -- for example, through the proposed BkBI acquisition -- provided the bank manages to retain a substantial proportion of its assets under management and clients, establishes appropriate risk management procedures, systems and controls, and maintains a conservative balance sheet, including strong asset quality.

Conversely, downward rating pressure could materialise in the event of a rapid business and geographic expansion -- such as the proposed BkBI acquisition -that is not accompanied by the development of the appropriate formalised control procedures required by a larger or more sophisticated institution, or a material deterioration in BIE's credit profile due to factors such as the substantial development of less stable activities - e.g. proprietary trading -- or increased dependence on volatile funding sources or a concentrated credit portfolio.

The following ratings were affirmed: Banco Itau Europa - Long-term deposits at Baa1 | - Short-term deposits at Prime-2 | - Financial strength at C- | Banco Itau Europa S.A. is based in Lisbon, Portugal, and had total assets of EUR2.9 billion as at 30 June 2006.