Fitch Affirms National Bank of Canada at 'A+'; Outlook Stable

Business Wire, June 26, 2008

NEW YORK -- Fitch affirms the Long-term Issuer Default Rating (IDR) of National Bank of Canada (NBC) at 'A ' and the short-term IDR at 'F1'. The Rating Outlook is Stable. Further, Fitch assigns an 'A' preferred stock rating to NBC's issuance of $350 million of Trust Capital Securities - Series 2 (NBC CapS II). This issuance receives 100% equity treatment (Class E) for Fitch capital purposes. A complete list of ratings follows this release.

NBC's ratings are underpinned by its leading banking franchise in Quebec and sound financial fundamentals. Operating performance remained sound for the latest interim period ending April 30, 2008. Over the past few years, operating earnings have benefited from modest provisions for credit losses. In first-half 2008 (1H08), loan loss provisions increased somewhat yet remained at a comfortable level. Also in 1H08, gross impaired loans grew slightly from a low base and coverage of gross impaired loans by loan loss reserves remains good.

In the latter part of fiscal 2007, NBC purchased Canadian non-bank ABCP (asset-backed commercial paper) from investment funds managed by NBC and non-institutional clients. In 4Q07, results were affected by large charges for this ABCP. The bulk of NBC's holdings of non-bank ABCP will likely be restructured under the 'Montreal Accord'. This restructuring plan was approved by 96% of note holders and the Ontario Superior Court, but is still subject to possible appeal. The plan will exchange Canadian non-bank ABCP for longer-dated notes to better match the maturities of the assets. All in all, this exposure appears manageable.

Other than its aforementioned purchase of Canadian non-bank ABCP, NBC's exposures to other headline risk areas remain minimal. Direct U.S. subprime mortgage exposure is zero; indirect U.S. subprime exposure is minimal; leveraged buyout commitments are zero; and CP liquidity lines to third party conduits are nil. NBC's sponsored ABCP conduit is moderate in size with no U.S. subprime exposure. NBC's Tier 1 ratio of 9.2% remained above its minimum target of 8.0% and well above the 7% 'well-capitalized' level under Canadian regulatory standards.

The Stable Outlook reflects an expectation for sound financial results, but does recognize the likely effects of a more difficult environment. Asset quality issues could increase, but are expected to remain well contained. The Canadian economy remains generally healthy but economic weakness in the U.S. could have spillover effects in Canada. The economy in NBC's home market of Quebec is likely more resilient given a comparatively lower reliance on exports to the U.S.

Fitch has affirmed the following ratings with a Stable Outlook:

National Bank of Canada

--Long-term IDR at 'A ';

--Short-term IDR at 'F1';

--Senior debt at 'A ';

--Subordinated debt at 'A';

--Preferred stock at 'A';

--Short-term deposits at 'F1';

--Individual at 'B';

--Support at '2';

--Support Floor at 'BBB-'.

National Bank of Canada New York Branch

--US$ Commercial Paper at 'F1';

--Short-term rating at 'F1'.

In addition, Fitch assigns the following rating:

NBC Asset Trust

--Preferred Stock 'A'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.