DBRS Changes Trend to Positive for UnionBanCal Corporation

Dominion Bond Rating Service (DBRS) has today confirmed the ratings of UnionBanCal Corporation (UBOC or the Company), Union Bank of California, N.A. and UnionBanCal Commercial Funding Corporation. At the same time DBRS changed the trend for the long-term ratings of UBOC and Union Bank of California, N.A. to Positive from Stable. As well, DBRS assigned a new short-term rating to UBOC with a Positive trend. The Stable trend for the short-term ratings of Union Bank of California, N.A. and UnionBanCal Commercial Funding Corporation remained unaffected since these ratings would not change in case the long-term ratings were to be upgraded by one notch.

The Positive trend recognizes UBOC’s robust operating results and excellent risk characteristics that exceed those of many of its peers similarly rated by DBRS. UBOC has produced solid earnings and excellent profitability over the past three years, and has maintained high credit quality, ample liquidity and strong capitalization throughout this period. DBRS believes that the principal challenge facing the Company – and a requirement for potentially higher ratings – is to defend its robust and very low-cost deposit franchise in a rising interest rate environment, as well as maintain stable organic earnings growth as it continues to build out its franchise in a fiercely competitive market.

The current ratings of UBOC reflect sound and sustainable earnings arising from a large and low-cost deposit franchise, a diversified revenue mix, low loan loss provisions and an efficient operating platform. Credit quality has steadily improved over the past three years due to initiatives to reduce exposure to higher-risk industries and an improving economy. The loan portfolio is sufficiently diversified and granular, and lacks any material risk concentrations.

The Company benefits from substantial deposit market shares in the major metropolitan areas of California. Core deposits, of which an unusually high one-half are non-interest-bearing deposits (at March 31, 2006), account for over 100% of the loan portfolio. The large size and low cost of core deposits contribute materially to the Company’s healthy liquidity, strong net interest margin and above-average profitability relative to its peers. The ratings of the holding company take into account a satisfactory risk profile evidenced by double-leverage in line with those of peers’ and adequate stand-alone liquidity to service its operating expenses and debt service obligations.

UnionBanCal Corporation, a commercial bank holding company with headquarters in San Francisco, California, reported $48.8 billion in assets at March 31, 2006.

The A (high) Deposits & Senior Debt rating of Union Bank of California, N.A. is equivalent to DBRS’s intrinsic assessment (IA) of the Bank’s SA-3 support assessment (SA). For more detail on the IA and SA methodology, please see the related DBRS press release issued on June 1, 2006. At the date of this publication, DBRS is in the process of adjusting its existing bank ratings to this new IA and SA methodology.

Note:
All figures in U.S. dollars.