RATINGS RATIONALE

The (P)Aaa rating is based on the unconditional and irrevocable nature of the guarantee. The rating is based on Moody's assessment that the terms and conditions of the guarantee provide for full and timely payment of the underlying obligations. The guarantee states in particular that Austria will pay any amounts originally scheduled to be due and payable on the securities, even if a future statutory loss-absorption or resolution regime were to be applied.

As communicated by HAA on 6 September 2012, the Austrian regulator together with its counterparties in Italy and Slovenia informed the bank in a draft decision that the bank would need to increase its capital ratio to 12.67% implying an additional capital need of EUR2.19 billion (for the bank's subsidiaries in Italy and Slovenia, the required levels are 10% and 9%, respectively). One key driver for the additional capital need is the difference between risk provisions and the expected loss calculations by the regulators. As of 30 June 2012 the bank had provisioned for 34% of its substantial stock of non-performing loans only. Moreover, the bank may prove unable to recover its loan collateral if liquidated.

The issuance of the EUR1 billion guaranteed subordinated debt is part of a package of recapitalisation measures, which also includes a EUR 500 million capital injection by the bank's sole owner, the Republic of Austria, to address these capital needs. It covers the EUR1.5 billion capital gap the regulators had identified at the end of 2011. The consultation process with the regulators regarding the exact amount and timeframe for any additonally required capital is ongoing.

Moody's will assign a definitive rating to the notes, once the final documentation for the notes is available.

WHAT COULD MOVE THE RATINGS UP/DOWN

Moody's notes that any rating actions on the government rating will have a direct bearing on the rating of the subordinated state-guaranteed notes.

PRINCIPAL METHODOLOGIES

HAA's subordinated state-guaranteed obligations are rated on the basis of a full risk transfer to the guarantor that is based on an irrevocable and unconditional guarantee provided by the bank's owner, the Republic of Austria.

REGULATORY DISCLOSURES

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Mathias Kuelpmann Senior Vice President Financial Institutions Group Moody'sDeutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Carola Schuler MD - Banking Financial Institutions Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Deutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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