Moody's Investors Service assigned Aa3/Prime-1 deposit ratings and a C financial strength rating to Wuerttembergische Hypothekenbank AG (Wuerttemberger Hypo). Moody's also assigned Aaa debt ratings to several oeffentliche Pfandbriefe (public sector-secured bonds), Aaa debt ratings to several Hypothekenpfandbriefe (mortgage bonds), and Aa3 debt ratings to several senior unsecured bonds issued by Wuerttemberger Hypo.
Moody's stated that the long-term deposit rating for Wuerttemberger Hypo is enhanced by the mortgage bank's 75.8% ownership by Bayerische Hypo- und Vereinsbank AG (HVB) -- rated Aa2/P-1/B+. Specifically, Wuerttemberger Hypo benefits from explicit support provided by HVB in the form of a Patronatserklaerung (letter of comfort). Whilst a range of Wuerttemberger Hypo's credit and market risk parameters must conform to HVB group risk management requirements, Wuerttemberger Hypo enjoys a relatively high degree of strategic and operational autonomy. At the same time, since HVB itself possesses the privilege to issue Pfandbriefe, Wuerttemberger Hypo does not benefit from any new business origination via its parent.
Wuerttemberger Hypo's adequate and stable financial fundamentals are reflected in the C financial strength rating. Moody's said that Wuerttemberger Hypo's risk-adjusted core recurring earnings are stable and broadly in line with those of its German mortgage-bank peers. The bank tries to balance cost efficiency with higher value-added services and products. New business is introduced either directly through Wuerttemberger Hypo's 30 domestic and five international outlets, or through co-operation agreements and independent brokers. Wuerttemberger Hypo was among the first German mortgage banks to target cross-border real estate borrowers and at present it has the most meaningful cross-border exposure of the five HVB mortgage bank subsidiaries.
Unlike some of its mortgage bank competitors, Wuerttemberger Hypo grew its balance sheet more prudently in recent years. In general, Wuerttemberger Hypo does not pursue low-margin public-sector lending growth as aggressively, but concentrates on tailor-made own refinancing solutions for its investors. Asset quality is again good in the wake of costly real estate expansion in the Eastern Federal States during the early 1990's. According to Moody's, the bank's asset-liability management policies are conservative, notably in comparison to some of its German peers, to the extent that reliance on transformation earnings is relatively low. A key challenge for Wuerttemberger Hypo, added Moody's, is maintaining prudent lending policies in the face of growing competition which could gradually marginalise the bank's domestic market position.
In assigning the Aaa Pfandbrief ratings, Moody's said that it regards the credit characteristics of these debt instruments to be directly linked to the overall longer-term creditworthiness of Wuerttemberger Hypo -- as defined primarily by the Aa3 deposit rating. Nevertheless, Pfandbrief ratings are higher than long-term deposit and senior unsecured debt ratings, owing to the comparatively greater predictability of timely debt servicing and also to the greatly reduced potential loss-severity in the event of a default.
Wuerttembergische Hypothekenbank AG, headquartered in Stuttgart, Germany, is one of Germany's medium-sized mortgage lenders engaged in real estate and public-sector lending. Wuerttemberger Hypo had total assets of Euro 24.5 billion (US$ 29 billion; DM 48 billion) as of December 31, 1998.
MOODY'S ASSIGNS Aa3/P-1 DEPOSIT RATINGS, Aaa PUBLIC-SECTOR AND MORTGAGE PFANDBRIEF RATINGS, AND C FINANCIAL STRENGTH RATING TO WUERTTEMBERGER HYPOTHEKENBANK
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