The ratings on Czech Republic-based Ceska Sporitelna a.s. (CS) reflect the bank's strong strategically important status within Austria-based Erste Bank der oesterreichischen Sparkassen AG (Erste Bank; --/--/A-2), which increased its ownership in the bank to 97.9% in 2003; its strong position in the Czech retail banking market, which provides it with outstanding liquidity; and its improved financial profile--including satisfactory profitability and capital, together with good asset quality. Constraining factors include higher-than-average, but improving, economic and industry risks, and the challenge to grow core earnings from increased lending volumes while maintaining strong asset quality. Erste Bank, the second-largest bank in Austria, has a strong strategic commitment to building a profitable business in Central and Eastern Europe. Following the purchase of controlling
