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26 Jul 2002
London, 26 July 2002 -- Moody's Investors Service downgraded the long-term ratings of Bayerische
Hypo- und Vereinsbank AG (HVB) to A1 from Aa3 and the bank's financial
strength rating (FSR) to B- from B. It also downgraded the
long-term unsecured ratings and Pfandbrief ratings of various subsidiaries
(see full list below), as well as HVB Real Estate Bank's FSR to
C+ from B-. The B- financial strength ratings
of Bank Austria was confirmed, as were the A1 issuer and deposit
ratings of HVB Ireland. The public-sector Pfandbrief ratings
of HVB and HVB Real Estate Bank are maintained at Aaa. The outlook
on all ratings is stable. These rating actions conclude a review
for possible downgrade initiated earlier this year.
Commenting on its rating actions, Moody's said that at this stage
it views HVB's credit fundamentals as compatible with a high single-A
rating. On the one hand, the group is likely to experience
ongoing challenges in boosting its currently weak recurring profitability
in Germany. The group's cost-containing efforts are very
slow to show material results, as HVB has to navigate through the
various layers of consolidation created by the mergers and acquisitions
of recent years (in Germany, Austria, Poland, and other
smaller markets). While costs could be eventually streamlined,
the far bigger challenge for HVB -- as well as for most
other German banks -- will be to grow revenues from their
retail and commercial banking activities. The difficult market
environment is now constraining any speedy improvement in HVB's profits,
but Moody's pointed out that beyond any cyclical difficulties there remain
structural barriers to a material improvement in HVB's (and other German
banks') earnings capacity.
On the other hand, Moody's pointed to HVB's continued good market
positioning in retail banking and other strategically important activities,
and also reiterated its expectation that the mergers and acquisitions
of recent years will prove very beneficial in the long term. In
fact, based on its existing footprint, once HVB starts functioning
as a more integrated financial group and at at a consistently higher recurring
profitability level, it would naturally turn into a true financial-services
powerhouse in its core markets -- Germany (especially Bavaria);
Austria; Poland; and other markets in Central and Eastern Europe.
Moody's also noted that further challenges with respect to HVB's asset
quality continue to exist, likely to require an ongoing provisioning
effort against the modest cushion afforded by pre-provision recurring
earnings. In fact, the rating agency added that a material
deterioration in asset quality at the group level in the future could
exert further pressure on HVB's ratings.
The downgrade of HVB Real Estate Bank's FSR reflects Moody's expectation
that the mortgage-bank subsidiary might need further loan loss
provisions until the considerable exposure to real estate loans in the
new German Bundeslaender will be properly covered for. Moody's
added also that it expects progress in the process of integrating HVB
Real Estate Bank in the HVB group. HVB Real Estate Bank is and
will remain a core strategic component of the group's activites -
a fact which underpins Moody's decision to maintain its debt and deposit
ratings at the same levels as of its parent's.
Regarding the change of the mortgage and some public-sector Pfandbrief
ratings, Moody's said that it regards the credit characteristics
of these debt instruments to be directly linked to the overall long-term
creditworthiness of the issuing banks -- as primarily defined
in their deposit ratings. Nevertheless, Pfandbriefe are rated
higher than corresponding long-term deposit and debt (public sector
Pfandbrief ratings marginally more than mortgage Pfandbrief ratings) owing
to the expectation of more timely debt servicing as well as the greatly
reduced potential loss severity of these collateralised debt instruments
in the event of default of the issuing bank.
The following ratings of HVB and its major subsidiaries were downgraded:
- Bayerische Hypo- und Vereinsbank AG: Senior long-term
debt, issuer and deposit ratings to A1 from Aa3; mortgage Pfandbriefe
to Aa1 from Aaa; long-term subordinated debt to A2 from A1;
subordinated Tier 3 debt instruments to A3 from A2; bank financial
strength rating to B- from B.
- HVB Real Estate Bank AG: Senior long-term debt and
deposit ratings to A1 from Aa3; mortgage Pfandbriefe to Aa1 from
Aaa; long-term subordinated debt to A2 from A1; bank
financial strength rating to C+ from B-.
- Bank Austria AG: Senior long-term debt and deposit
ratings to A1 from Aa3; subordinated debt to A2 from A1.
- Creditanstalt AG: Deposit ratings to A1 from Aa3.
- Bayerische Hypo- und Vereinsbank AG, Paris Branch:
Senior long-term debt and deposits to A1 from Aa3.
- Bayerische Hypo- und Vereinsbank AG, Singapore Branch:
Senior long-term debt to A1 from Aa3; subordinated debt to
A2 from A1
- Bayerische Hypo-und Vereinsbank AG, Hong Kong Branch:
Senior long-term debt to A1 from Aa3.
- HypoVereinsbank Overseas Finance N.V.: Senior
long-term debt rating to A1 from Aa3; long-term subordinated
debt to A2 from A1.
- HypoVereinsbank Finance N.V.: Senior long-term
debt rating to A1 from Aa3; long-term subordinated to A2 from
- HypoVereinsbank Luxembourg S.A.: Issuer rating
and deposit ratings to A2 from A1; subordinated debt to A3 from A2;
preferred stock rating to Baa1 from A3.
- HVB Funding Trust, II, III, IV, V,
VII, VIII: to A3 from A2.
- Wuerttembergische Hypothekenbank AG: Senior long-term
debt and long-term bank deposits to A2 from A1; subordinated
debt to A3 from A2; mortgage Pfandbriefe to Aa2 from Aa1; public
sector Pfandbriefe to Aa1 from Aaa.
- Westfaelische Hypothekenbank AG: Senior unsecured and long-term
bank deposits to A2 from A1; subordinated debt to A3 from A2;
mortgage Pfandbriefe to Aa2 from Aa1 and public sector Pfandbriefe to
Aa1 from Aaa.
-Westhyp Finance BV: Senior long-term debt to A2 from
A1; subordinated debt to A3 from A2.
-Bayerische Hypotheken-und Wechsel Bank AG: Senior
long-term debt to A1 from Aa3; subordinated debts to A2 from
A1; mortgage Pfandbriefe to Aa1 from Aaa.
The following ratings were confirmed:
- Bank Austria AG: Bank financial strength rating at B-.
- HVB Bank Ireland: Issuer and deposits ratings at A1.
Headquartered in Munich, Bayerische Hypo- und Vereinsbank
is Germany's second largest banking group. As of 31 December 2001,
the group had consolidated total assets of EUR 728 billion.
Samuel S. Theodore
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
MOODY'S DOWNGRADES HVB'S RATINGS TO A1/B- FROM Aa3/B ; RATINGS OF VARIOUS SUBSIDIARIES ALSO DOWNGRADED, AS WERE MORTGAGE PFANDBRIEF AND SOME PUBLIC-SECTOR PFANDBRIEF RATINGS TO Aa1 FROM Aaa; PUBLIC SECTOR PFANDBRIEF RATINGS OF HVB AND HVB REAL ESTATE ARE
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
No Related Data.
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