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23 Oct 2002
London, 23 October 2002 -- Moody's placed under review for possible downgrade the unsecured,
secured, and financial strength ratings of HVB Group and its subsidiaries.
The rating review follows the group's announcement of an unexpected sharp
rise in loan loss provisions for the remainder of 2002, along with
some major restructuring plans. While placing most ratings under
review, Moody's said that it confirmed with a stable outlook the
Prime-1 short-term ratings of Bayerische Hypo- und
Vereinsbank (HVB Group's Munich-based flagship bank) and of its
subsidiary Bank Austria. Bank Austria's B- financial strength
rating was confirmed as well, with a stable outlook.
Moody's said that the negative outlook for HVB's long-term and
financial strength ratings already included the expectation of poor profitability
for the remainder of 2002 and very possibly for 2003 as well. However
the announced unexpected sharp rise in loan loss provisions for the remainder
of this year - taking total expected loan-loss provisions
for 2002 to 3.3 billion - raises additional concerns
with respect to the true loss contents of HVB's loan portfolio.
The rating agency noted as a positive HVB's announcement that the coverage
ratio for non-performing loans rises to 101%, adding
however that a re-assessment of further potential loan impairments
not reflected in the current pool of non-performing credits will
be part of the rating review process.
Commenting on the planned separation of HVB Group from its mortgage-bank
subsidiaries, Moody's noted that, if well carried through,
it could lead to a strengthening of the financial fundamentals and profitability
of Bayerische Hypo- und Vereinsbank AG. However, there
will be significant uncertainty regarding this planned transaction for
some time, and the remaining HVB's commitment to the separating
mortgage banks will be an important element in the rating analysis.
With respect to HVB's mortgage-bank subsidiaries --
HVB Real Estate Bank, Wuerttembergische Hypothekenbank, and
Westfaelische Hypothekenbank -- the rating agency cautioned
that the likelihood of a spin-off creates more material uncertainty
for them. As a consequence, the review for possible downgrade
includes not only their unsecured long-term ratings, their
Pfandbrief ratings, and -- for the first two only
- their financial strength ratings, but also their short-term
As another important element of the rating review analysis, Moody's
cited the need to assess the announced shift in HVB Group's strategic
plans. The German banking industry is clearly undergoing financial
difficulties, the pressure on most institutions is high for better
performance, and therefore many banks' strategies are inherently
reactive to market trends and expectations, rather than proactive.
Banks benefiting from focused and well-defined strategic plans,
while clearly not having their problems solved merely by the existence
of such plans, would nevertheless benefit from a crisp road map
for their future evolution. Related to this, Moody's said
again that more determined cost containment and reduction would aid,
at least partially, HVB Group's earnings capacity.
Regarding Bank Austria, Moody's noted that its performance continues
to remain satisfactory, therefore underpinning the existing B-
financial strength rating.
While detailing the concerns that support its rating review, Moody's
added that HVB Group remains well positioned in its core markets and that
the mergers and acquisitions of the recent years should in time prove
to be beneficial if significant efficiencies are ultimately achieved.
Furthermore, Moody's clarified again that it does not see any material
threat to the group's solvency and liquidity. This assessment underpins
Moody's decision to confirm Bayerische Hypo- und Vereinsbank's
short-term rating at Prime-1, with a stable outlook.
The following ratings of HVB and its major subsidiaries are under review
for possible downgrade:
Bayerische Hypo- und Vereinsbank AG: A1 Senior long-term
debt, issuer and deposit ratings; Aa1 mortgage and Aaa public-sector
Pfandbriefe; A2 long-term subordinated debt; A3 subordinated
Tier 3; B- bank financial strength rating.
- HVB Bank Ireland: Issuer and deposits ratings at A1.
- 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.
- Bank Austria Creditanstalt AG: A1 Senior long-term
debt and deposit ratings; A2 subordinated debt.
- Bayerische Hypo- und Vereinsbank AG, Paris Branch:
A1 Senior long-term debt and deposits,
- Bayerische Hypo- und Vereinsbank AG, Singapore Branch:
A1 Senior long-term debt; A2 subordinated debt rating.
- Bayerische Hypo-und Vereinsbank AG, Hong Kong Branch:
A1 Senior long-term debt.
- HypoVereinsbank Overseas Finance N.V.: A1
Senior long-term debt rating; A2 long-term subordinated
- HypoVereinsbank Finance N.V.: A1 Senior long-term
debt rating; A2 long-term subordinated debt.
- HypoVereinsbank Luxembourg S.A.: A2 Issuer
rating and deposit ratings; A3 subordinated debt; Baa1 preferred
stock rating; C+ financial strength.
- HVB Funding Trust, II, III, IV, V,
VII, VIII...A3 preferred stock 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
-Westhyp Finance BV: A2 Senior long-term debt;
A3 subordinated debt.
-Bayerische Hypotheken-und Wechsel Bank AG: A1 Senior
long-term debt; A2 subordinated debts; Aa1 mortgage and
Aaa public sector Pfandbriefe.
The following ratings were confirmed:
- Bayerische Hypo- und Vereinsbank AG: Short-term
deposit rating at P-1.
- 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.
- Westfaelische Hypothekenbank: Bank financial strength 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 EUR 728 billion.
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
MOODY'S REVIEWS FOR POSSIBLE DOWNGRADE THE UNSECURED, SECURED, AND FINANCIAL STRENGTH RATINGS OF HVB GROUP AND SUBSIDIARIES; P-1 SHORT-TERM RATINGS OF BOTH BAYERISCHE HYPO- UND VEREINSBANK AND BANK AUSTRIA ARE CONFIRMED WITH A STABLE OUTLOOK
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
No Related Data.
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