Fitch Takes Rating Action on Foreign-Owned Uruguayan Banks.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 1, 2004

Fitch Ratings has upgraded the long-term foreign currency (LTFC) ratings of foreign-owned Uruguayan banks, HSBC Uruguay and Banco Santander S.A., to 'B' from 'B-' following a similar action taken on Uruguay's sovereign ratings.

This action reflects our view that the current ratings of these banks are constrained by the foreign currency sovereign ceiling in light of their strong foreign parents, which have provided both capital and liquidity support throughout the crisis. Fitch has also changed their support ratings to '4' from '5', denoting a limited probability of support. While we view that there is an increased probability that shareholders will continue to support their subsidiaries amid growing signs of economic stabilization, the assigned support rating also reflects the high level of systemic risk in Uruguay.

Thus far, the parents of these banks have provided support throughout the crisis and their continued ability to do so is evident in the LTFC ratings assigned by Fitch. HSBC Uruguay received capital support of US$4.8 million in 2003 and US$2 million in February 2004 from its parent HSBC Holdings PLC (LTFC rating of 'AA-' by Fitch). Moreover, HSBC's commitment to the region has been exceptional, even in the case of Argentina, where the bank paid on all external obligations throughout the crisis, paying obligations from other subsidiaries when capital controls were in place in Argentina. Santander received capital injections of US$32 million in 2003 and an additional US$13 million in 2004 from its parent Banco Santander Central Hispano (LTFC rating of 'AA-' by Fitch).

We are also withdrawing the LTFC 'B-' rating assigned to Banco Sudameris as it ceased to operate on March 31, 2004. The majority of the bank's assets and liabilities have been sold to Banco ACAC, while the remaining assets and liabilities are being liquidated by the bank.

The financial condition of the system has been severely weakened by the crisis and significant challenges remain. Positively, deposits have rebounded somewhat, with non-financial sector deposits growing 25% among private sector banks in 2003. Nevertheless, they remain significantly below historical levels, particularly non-resident deposits (mainly Argentines), and the system's ability to recapture these deposits remains doubtful in the near term. As a result of this growth coupled with the sharp credit contraction since the crisis, most private sector banks, including the aforementioned banks, have maintained fairly robust levels of liquidity. At end-2003, HSBC Uruguay, Santander and Sudameris maintained liquid assets, comprised of cash, short term inter-bank deposits and to a much lesser extent, government securities, equivalent to 79%, 58% and 79% of total deposits and short term obligations. The high levels of liquidity coupled with high provision expenses has resulted in continued, albeit narrowing, losses in 2003 and a relatively high level of problem assets.

Rating Action Summary:

Banco Santander S. A. (Santander)

-- Long-term Foreign Currency rating upgraded to 'B' from 'B-',

Rating Outlook Stable;

-- Support Rating change from '5' to '4'.

HSBC Bank (Uruguay) S.A.

-- Long-term Foreign Currency rating upgraded to 'B' from 'B-',

Rating Outlook Stable;

-- Support Rating change from '5' to '4'.

Banco Sudameris - Uruguay Branch (Sudameris)

-- Long-term foreign currency rating of 'B-', withdrawn.