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Rating Action:

Moody's affirms Siemens Bank's ratings at A1/P-1; outlook stable

13 Feb 2018

Standalone credit profile upgraded to Ba1 from Ba2

Frankfurt am Main, February 13, 2018 -- Moody's Investors Service has today affirmed Siemens Bank GmbH's (Siemens Bank) A1 long-term and P-1 short-term issuer ratings and upgraded its standalone credit profile to Ba1 from Ba2. The outlook on the bank's long-term issuer ratings is stable. Siemens Bank's ratings benefit from the rating agency's unchanged assessment of a strong support from its parent and sole owner, Siemens Aktiengesellschaft (Siemens, A1 stable).

A full list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

UPGRADE OF STANDALONE CREDIT PROFILE

The upgrade of Siemens Bank's standalone credit profile by one notch to Ba1 from Ba2 reflects the establishment of (1) a robust track record in developing the bank from a cash-focused entity into a lending-focused institution, which supports the financing of its parent's products for Siemens customers, thereby underpinning its strategic importance for the group; and (2) a sustained sound financial profile during the past years.

Siemens Bank's gross loans increased from €3.1 billion at end-September 2013 to €5.4 billion at end-September 2017, a sizeable increase which better allows the Munich-based bank to successfully operate as a captive finance entity in the EMEA and APAC regions. Moody's believes the bank's prudent risk management and stringent underwriting criteria have not led to a material adverse change in concentration risks as well as geographic and industry exposures during this period of extraordinary growth. Siemens Bank's lending activities focus on providing financing to Siemens' customers for energy finance, infrastructure, industry and healthcare projects.

Moody's assessment also takes into account Siemens Bank's unchanged strong capitalisation and asset quality. Based on €1.0 billion equity as of end-September 2017, the bank's Common Equity Tier 1 capital ratio was 19.0%, compared with 21.6% at end-September 2016. The moderate reduction reflects higher risk-weighted assets because of the bank's continued business expansion. Siemens Bank's problem loans as a percentage of gross loans decreased to 0.2% at end-September 2017 compared with 2.8% at end-September 2016, based on Moody's calculations. During 2017, Siemens Bank benefited from the benign environment it operates in, mainly the EMEA and APAC regions, as well as active risk management which helped to further improve its asset quality.

Siemens Bank's credit profile remains constrained by its status as a captive finance company, as well as its limited independent funding franchise. Siemens Bank's funding remains highly reliant on its parent resources which provided around 88% of total liabilities at end-September 2017. This support is reflected in Siemens Bank's long-term issuer ratings, which incorporates a strong support assumption, while at the same time the absence of an independent funding franchise represents a ratings constraint for Siemens Bank's standalone credit profile. The rating agency further sees some risks imbedded in the bank's strong lending growth, including exposure to the construction phase of projects financed, another constraining consideration.

AFFIRMATION OF THE LONG-TERM ISSUER RATINGS

The affirmation of Siemens Bank's A1 issuer ratings reflect the upgrade of its standalone credit profile and Moody's unchanged assessment of a strong support for Siemens Bank from Siemens, which leads to six notches of rating uplift.

Siemens Bank's ratings reflect the bank's close integration in Siemens group, underpinned by (1) its close financial links to Siemens and its operations; (2) its high integration into Siemens' financial activities, which are coordinated by Siemens Financial Services (SFS) division; (3) its strong association with the parent as reflected by the usage of the Siemens brand; and (4) a profit and loss transfer agreement between Siemens and Siemens Bank. The bank's ratings also benefit from a track record of capital measures, illustrating Siemens' commitment to support the bank's growth and consider full ownership of the bank by Siemens.

WHAT COULD CHANGE THE RATING UP/DOWN

Upwards pressure on Siemens Bank's ratings would develop if the credit profile of its parent Siemens were to strengthen, which Moody's does not currently expect as indicated by the stable outlook on Siemens' A1 rating. An upgrade of Siemens Bank standalone credit profile would require a significant improvement of its franchise and risk position, such as establishing a diversified funding profile, a more mature and more balanced lending book, combined with improved financials, and developing its own funding franchise.

Siemens Bank's rating would come under downwards pressure if Siemens' credit profile were to weaken. The bank could be rated lower than the parent if (1) its standalone credit profile weakens; (2) it pursues business objectives that are not fully aligned with its parent; and/or (3) parental support was to deteriorate as a result of weaker and/or shorter-dated contractual obligations, in particular the profit- and loss-sharing agreement.

LIST OF AFFECTED RATINGS

Affirmations:

....LT Issuer Rating (Local & Foreign Currency), Affirmed at A1, Outlook remains Stable

....ST Issuer Rating (Local & Foreign Currency), Affirmed at P-1

Outlook Action:

....Outlook, Remains Stable

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Finance Companies published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Swen Metzler
VP - Senior Credit Officer
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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