Approximately $365.4 Billion of Debt Securities Affected.
London, 22 January 2003 -- Moody's Investors Service downgraded the senior unsecured deposit and
debt ratings of Bayerische Hypo- und Vereinsbank AG (HVB) to A3
from A1 and the bank's financial strength rating (FSR) to C- from
B-. The long-term unsecured ratings of various rated
subsidiaries were also downgraded (see full list below). The outlook
on HVB's long- and short-term debt and deposit ratings and
FSR is stable. The rating actions follow the review process initiated
on 23 October 2002 following the group's announcement of an unexpected
sharp rise in loan loss provisions for the remainder of 2002, along
with major restructuring plans.
The ratings for HVB's mortgage Pfandbriefe have been downgraded to Aa3
from Aa1 and the ratings for public-sector Pfandbriefe to Aa2 from
Aaa. The long-term deposit and debt ratings of Bank Austria
Creditanstalt (BA-CA) have been downgraded to A2 from A1.
The outlook on these ratings is stable. The long-term debt
and deposit ratings of HVB Banque Luxembourg (HVB Luxembourg) have been
downgraded to A3 from A1 and remain on review for possible downgrade.
HVB Luxembourg's Prime-1 short-term debt and deposit ratings
and its C+ FSR are also maintained on review for possible downgrade.
Moody's has affirmed with a stable outlook the Prime-1 short-term
debt and deposit ratings of HVB and its guaranteed subsidiaries,
including HVB Ireland, as well as BA-CA's Prime-1
short-term debt and deposit ratings and its B- FSR.
These ratings were not included in the review process.
The long- and short-term debt and deposit ratings and FSRs
of HVB's three mortgage bank subsidiaries - HVB Real Estate (A1/P-1/C+),
Wuerttembergische Hypothekenbank (A2/P-1/C+) and Westfaelische
Hypothekenbank (A2/P-1/C) - remain on review for possible
downgrade, as the details of the planned spin-off of HVB's
commercial real estate business, including the three banks,
make their future fundamentals still uncertain at this stage, Moody's
noted.
These rating actions reflect Moody's belief that HVB's fundamentals remain
structurally affected by the group's persistently weak recurring profitability,
especially in the German market. The rating agency added that HVB
seems now committed to more drastic cost reductions and expects 2003 to
see an improvement in this respect. Reducing credit risk concentration,
however, remains an uphill challenge, given the sheer size
of HVB's loan portfolio and the legacy of its lending focus during the
last decade. HVB has the largest loan portfolio among all German
banks and has exposure to troubled industries and corporates.
A third major challenge for HVB, however, could be the most
difficult one: that of structurally boosting its revenues in the
German market. Moody's said that, along with most other large
German banks, HVB will take some time until it can restore better
profitability.
In this context, the short-term impact on HVB's rating of
the planned separation from its mortgage bank subsidiaries should be relatively
neutral. Whilst on the one hand HVB will benefit from reducing
its exposures to the difficult German commercial real estate market,
on the other hand the radical restructuring plans will absorb management
attention and could strain HVB's financial resources.
The spin-off prompts material uncertainty for the three mortgage
bank subsidiaries, the rating agency cautioned, especially
as it is not yet clear whether these banks will be able to better align
their risk management and implement an efficient group structure.
As a consequence, Moody's is maintaining its review for possible
downgrade on these banks' rating and is extending it to include not only
their unsecured long-term ratings, their Pfandbrief ratings
and their short-term ratings but also their financial strength
ratings.
Moody's said that the new ratings for HVB and their stable outlook,
including for the Prime-1 short-term ratings, continue
to reflect HVB Group's position as one of Germany's and Europe's major
financial institutions, with a stable franchise in retail and commercial
banking, and with a strong foothold in Austria and Poland.
The new ratings and their stable outlook are also underpinned by HVB's
renewed commitment to improve profitability and to safeguard sufficient
capitalisation.
The long-term debt and deposit ratings of several subsidiaries
were also downgraded, reflecting their close integration into the
group. Although the current ratings for HVB Luxembourg are underpinned
by the 'Patronatserklaerung' (letter of comfort) from HVB, Moody's
is maintaining the bank's A3/P-1 long- and short-term
debt and deposit ratings and C+ FSR on review for possible downgrade,
considering the level of autonomy of HVB Luxembourg. Moody's rating
review will focus on the extent to which the intrinsic creditworthiness
of HVB Luxembourg, combined with ongoing support from HVB,
can underpin the new ratings.
The downgrade of BA-CA's long-term debt and deposit ratings
to A2 from A1, now one notch above those of its parent HVB,
reflects the strong franchise of Bank Austria Group and its good financial
fundamentals, underpinned by its B- FSR. In addition,
Moody's said that the likelihood of BA-CA being impacted by a potential
further deterioration of HVB's creditworthiness is somewhat more remote
than for other subsidiaries that are fully owned by HVB, especially
as BA-CA is the largest banking group in Austria.
The following ratings of HVB and its major subsidiaries were downgraded:
Bayerische Hypo- und Vereinsbank AG: A1 to A3 Senior long-term
debt, issuer and deposit ratings; Aa1 to Aa3 mortgage and Aaa
to Aa2 public-sector Pfandbriefe; A2 to Baa1 long-term
subordinated debt; A3 to Baa2 subordinated Tier 3; B-
to C- bank financial strength rating.
- HVB Bank Ireland: Issuer and deposits ratings to A3 from
A1.
- Bank Austria Creditanstalt AG: To A2 from A1 Senior long-term
(non-guaranteed) debt and deposit ratings; A2 to A3 (non-guaranteed)
subordinated debt.
- Bayerische Hypo- und Vereinsbank AG, Paris Branch:
A1 to A3 Senior long-term debt and deposits,
- Bayerische Hypo- und Vereinsbank AG, Singapore Branch:
A1 to A3 Senior long-term debt; A2 to Baa1 subordinated debt
rating.
- Bayerische Hypo-und Vereinsbank AG, Hong Kong Branch:
A1 to A3 Senior long-term debt; A2 to Baa1 subordinated debt
rating.
- HypoVereinsbank Overseas Finance N.V.: A1
to A3 Senior long-term debt rating; A2 to Baa1 long-term
subordinated debt.
- HypoVereinsbank Finance N.V.: A1 to A3 Senior
long-term debt rating; A2 to Baa1 long-term subordinated
debt.
- HVB Banque Luxembourg S.A.: A2 to A3 Issuer
rating and deposit ratings; A3 to Baa1 subordinated debt; Baa1
to Baa2 preferred stock rating;.
- HVB Funding Trust, II, III, IV, V,
VII, VIII...A3 to Baa2 preferred stock rating.
-Bayerische Hypotheken-und Wechsel Bank AG: A1 to
A3 Senior long-term debt; A2 to Baal subordinated debts;
Aa1 to Aa3 mortgage and Aaa to Aa2 public sector Pfandbriefe.
The following ratings remain under review for possible downgrade:
- HVB Real Estate Bank AG: A1 Senior long-term debt
and deposit ratings; Aa1 mortgage and Aaa public-sector Pfandbriefe;
A2 long-term subordinated debt; C+ bank financial strength
rating; P-1 short-term deposit.
- HVB Banque Luxembourg S.A.: A3 Issuer rating
and deposit ratings; Baa1 subordinated debt; Baa2 preferred
stock rating; P-1 short-term ratings; C+
financial strength rating.
- Wuerttembergische Hypothekenbank AG: A2 senior long-term
debt and long-term bank deposits; A3 subordinated debt;
Aa2 mortgage and Aa1 public-sector Pfandbriefe; P-1
short-term deposit rating; C+ financial strength rating.
- Westfaelische Hypothekenbank AG: A2 senior unsecured and
long-term bank deposits; A3 subordinated debt; Aa2 mortgage
and Aa1 public sector Pfandbriefe. P-1 short-term
deposit rating; Bank financial strength rating at C.
- Westhyp Finance BV: A2 Senior long-term debt;
A3 subordinated debt; P-1 short-term rating.
These ratings were not under review are affirmed:
- Bayerische Hypo- und Vereinsbank AG: Short-term
deposit rating at P-1.
- Bayerische Hypo- und Vereinsbank AG, Singapore Branch:
Short-term rating at P-1.
- Bayerische Hypo- und Vereinsbank AG, Paris Branch:
Short-term rating at P-1.
- HVB US Finance Inc: P-1 Short-term Ratings
- Vereinsbank Finane (Delawar) Inc: P-1 Short-term
ratings
- HypoVereinsbank Overseas Finance N.V: P-1
short-term ratings
- Bank Austria AG: Bank financial strength rating at B-;
P-1 short-term deposit rating.
- HVB Ireland: Bank financial strength rating at C-;
P-1 short-term deposit rating.
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 EUR728 billion.
London
Samuel S. Theodore
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
London
Michael Dawson-Kropf
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
MOODY'S DOWNGRADES HVB'S SENIOR UNSECURED RATINGS AND FINANCIAL STRENGTH RATING TO A3/C- FROM A1/B-; SHORT-TERM RATINGS AFFIRMED AT P-1; ALL RATINGS HAVE A STABLE OUTLOOK; OTHER GROUP RATINGS REMAIN ON REVIEW FOR POSSIBLE DONWGRADE
