Moody's placed on review for possible downgrade the long-term ratings of Bayerische Hypo- und Vereinsbank AG (HypoVereinsbank) -- senior at Aa2 -- and the bank's B+ financial strength rating, as well as the long-term unsecured ratings of all of the group's rated subsidiaries. The Aaa ratings for mortgage Pfandbriefe of two mortgage-bank subsidiaries, Wuerttembergische Hypothekenbank and Westfaelische Hypothekenbank, were also placed on review. The Prime-1 ratings for short-term debt and deposits for all group entities were confirmed, as were all Aaa ratings for public-sector Pfandbriefe and the Aaa rating for the mortgage Pfandbriefe issued directly by HypoVereinsbank.
HypoVereinsbank announced yesterday that 1) an independent auditor confirmed that the DM 3.5 billion special charge taken in 1998 for real-estate provisions was, in fact, necessary; 2) there would be significant senior management-level departures as a result; and 3) it will take additional charges for real estate exposures in 1999. Moody's said that it views the loan-loss provisioning effort as a positive development, and also that the management changes are not likely to alter the bank's current strategic focus on risk reduction. Concerns remain, however, regarding the asset-quality legacy, and the rating review will focus on the bank's plans to manage the troublesome commercial real estate exposures, which are large relative to equity, as well as the prospects to consistently generate higher risk-adjusted returns in the context of a rapidly evolving and increasingly competitive operating environment for all German banks.
Moody's added that HypoVereinsbank remains one of Gemany's stronger banks, based on its focused regional franchise and large market share in mortgage banking, but the difficulties in the real estate portfolio continue to present challenges. At the same time, rapid and smooth implementation of the merger has, so far, been more difficult than originally expected.
The following ratings of HypoVereinsbank and its major subsidiaries were placed on review for possible downgrade:
Bayerische Hypo- und Vereinsbank AG -- Senior long term debt, issuer and deposit ratings at Aa2, long term subordinated debt at Aa3, subordinated Tier 3 debt instruments at A1, bank financial strength rating of B+.
Bayerische Hypo- und Vereinsbank AG, Paris Branch --Senior long term debt rating at Aa2.
Bayerische Hypo- und Vereinsbank AG, New York Branch -- Senior long term debt and deposits at Aa2.
HypoVereinsbank Overseas Finance N.V. -- Senior long term debt rating Aa2, long term subordinated debt at Aa3.
HypoVereinsbank Finance N.V. --Senior long term debt rating Aa2, long term subordinated Aa3.
HypoVereinsbank Ireland --Issuer rating Aa3, senior long term debt rating Aa3.
HypoVereinsbank Luxembourg S.A. --Issuer rating and long-term debt and deposit ratings at Aa3, subordinated debt at A1, Silent Participation at "a2".
HVB Funding Trust I and HVB Funding Trust II at "aa3".
Wrttembergische Hypothekenbank AG, senior long term debt and long term bank deposits at Aa3, mortgage Pfandbriefe at Aaa.
Westf„lische Hypothekenbank AG, senior unsecured and long term bank deposits at Aa3, subordinated debt A1, Mortgage Pfandbriefe at Aaa.
The following ratings have been confirmed:
All short term ratings of Bayerische Hypo- und Vereinsbank AG and its major group subsidiaries at Prime-1.
All Public Sector Pfandbriefe of Bayerische Hypo- und Vereinsbank AG and its group subsidiaries at Aaa.
Mortgage Pfandbriefe of Bayerische Hypo- und Vereinsbank AG at Aaa.
Financial strength ratings of C, C, and C+ for Westfaelische Hypothekenbank AG, Wuerttembergische Hypothekenbank AG, and HypoVereinsbank Luxembourg SA, respectively.
Bayerische Hypo-und Vereinsbank, headquartered in Munich, is Germany's second-largest bank with consolidated assets at September 30, 1999 of ¬ 495 billion (approximately US$ 528 billion).
MOODY'S REVIEWS FOR POSSIBLE DOWNGRADE THE LONG-TERM RATIINGS OF BAYERISCHE HYPO-UND VEREINSBANK (SENIOR AT Aa2) AND THE B+ FINANCIAL STRENGTH RATING
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