MOODY'S LOWERS THE BANK FINANCIAL STRENGTH RATING OF BAYERISCHE LANDESBANK GIROZENTRALE TO C; Aaa/P-1 DEPOSIT AND DEBT RATINGS CONFIRMED
London, 07-22-98 -- Moody's Investors Service lowered the Bank Financial Strength Rating of Bayerische Landesbank Girozentrale (Balaba) to C, and confirmed the bank's Aaa long-term and Prime-1 short-term ratings. This rating action concludes a rating review initiated in January 1998.
Moody's said that the rating action principally reflects the group's extensive exposure to the more troubled Asian countries and the consequent magnitude of potential credit costs as well as the relatively stable but weak intrinsic recurring earnings power relative to the overall risk profile of the bank. Balaba's risk-adjusted profitability is slightly below the average of its German Landesbanken peers. Moody's noted that whilst Balaba's absolute exposure levels to the troubled Asian countries -- Indonesia, Malysia, South Korea and Thailand -- has been reduced somewhat during 1998, its aggregate exposure remains high in relation both to the group's annual recurring earnings and to core capital. The group's Asian strategy remains broadly unchanged. Namely, Balaba seeks to accompany and support German clients to the region and to simultaneously pursue a business strategy that revolves around local lending to the region's larger bank and non-bank entities. At the same time, the group has emphasised its commitment to the region whereby it intends to maintain its four Asian branches located in Singapore, Labuan, Hong Kong and Tokyo. In the Asian context, Moody's is of the opinion that further loan loss provisions within the Balaba group, beyond those taken in 1997, may well be necessary over a short- to medium-term time horizon. To this extent, the rating agency will closely monitor the group's ongoing exposure both to the entire region but especially to Malaysia and critically assess any further impact on the Balaba group stemming from a potential further deterioration of the region.
Moody's stated that the confirmation of the debt and deposit ratings at Aaa is based on the support mechanisms of Anstaltslast and Gewaertraegerhaftung, which protect the credit quality of the bank, even in the case of potential deterioration in fundamentals.
At year-end 1997 Balaba, based in Munich, Germany, as Germany's second largest Landesbank group had total consolidated assets of DM 435 billion (approximately US$ 244 billion).
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