Fitch Downgrades COFAC's L-T FC Rating to 'CCC' from 'CCC+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 24, 2004

Fitch Ratings has downgraded Cooperativa Nacional de Ahorro y Credito's (COFAC) international long-term foreign currency rating to 'CCC' from 'CCC+'. A Stable Rating Outlook has been assigned. COFAC's Support Rating has been affirmed at '5'.

The downgrade reflects further deterioration in the bank's solvency and liquidity indicators since 2002. Efforts made to increase capital base during 2003, through the issuance of preferred shares (USD 4 million) and subordinated notes (USD 1 million), was offset by significant losses and additional sources of capital are limited. As a result, COFAC was not in compliance with minimum capital requirements at end-2003, which will likely persist until end-2004 according to management forecasts. The assigned ratings also take into account COFAC?s position as the largest credit cooperative in Uruguay with a deposit market share of 2.7%.

Reported losses as of end-2003 (USD 7 million) were mainly attributable to significantly lower net interest income since the crisis and the lack of credit demand given the continued difficult economic conditions in 2003. Asset quality continued to deteriorate in 2003, with non-performing loans reaching 39.6% of total loans, while reserve coverage remained low, further pressuring already weak capital levels.

The main source of funding continues to be deposits, which represented 83% of liabilities at end-2003. Although liquidity is still weak, it improved when compared with the previous year. Liquid assets represent 24.1% of deposits and short term funds. During the crisis COFAC required lines from the Uruguayan Central (BCU), which has since been cancelled. As of end-2003, COFAC reported total assets and equity of $306.6 million and $3.6 million, respectively.