"The rating reflects the full state ownership of the bank, low credit risk on its assets due to its significant exposure to government securities and the explicit government guarantee on deposits," Fitch said.
"Fitch also draws comfort in NSB's strong deposit mobilising franchise in the retail space, although its flexibility to mobilise deposits through competitive interest rate changes is limited due to the significant exposure to lower yielding government securities."
According to its governing law, NSB has to invest a minimum 60 percent of its deposits in government securities. At the end of 2006, 68 percent of total assets were in government securities.
Loans accounted for only 19 percent of assets.
Loans to banks and other financial institutions, loans against deposits and gold-backed loans accounted for 10 percent of total assets while housing loans accounted for 7 percent of total assets.
The bank's gross non-performing loan ratio was low at 1.2 percent by end 2006.