FRANKFURT & LONDON--(BUSINESS WIRE)--Fitch Ratings has downgraded Landesbank Berlin AG's (LBB) and Berlin-Hannoversche Hypothekenbank AG's (Berlin Hyp) Long-term Issuer Default Ratings (IDR) to 'A+' from 'AA-'with a Stable Outlook. A full list of rating actions is at the end of this comment.
This rating action is in conjunction with Fitch's ongoing broader review of large and relatively highly rated banks in its global rating portfolio. LBB's and Berlin Hyp's IDR are based on LBB's Support Rating Floor (SRF). The SRF has been lowered to 'A+' from 'AA-' to bring it into line with the 'A+' SRFs of the largest banks in the large 'AAA' euro zone countries. It is Fitch's view that SRFs above the single 'A' category will now only be appropriate for banks either explicitly guaranteed by states rated in that range or whose business or ownership is otherwise very closely linked to the highly rated state. This is not the case for LBB. (see 'Fitch Comments on Support for Euro Banks; Takes Various Support-Driven Rating Actions', dated 13 October 2011 at www.fitchratings.com).
Fitch says that LBB's 'A+' and 'F1+' IDRs now reflect their strategic importance for its owners, the German savings banks, which dominate German retail banking. Under Fitch's "Rating Criteria for Banking Structures Backed by Mutual Support Mechanisms" Sparkassen-Finanzgruppe's (SFG) IDRs apply as group rating floors to 429 savings banks (Sparkassen) within SFG, an unconsolidated group of 620 institutions with over EUR3trn of assets. Because LBB's IDRs are no longer based on direct support from the state of Berlin or the German state, Fitch has withdrawn its SRF. Fitch does not currently assign SRFs to banks whose ratings are based on institutional support. However, it remains highly likely, in Fitch's view, that, if required, state support for LBB would be forthcoming, either directly or indirectly through the savings bank group.
Berlin Hyp's Long-term IDR and Support Rating continue to reflect Fitch's opinion that this support would filter through the bank's direct majority owner, LBB. There is a profit and loss transfer agreement, as well as a declaration of backing, between LBB and Berlin Hyp. Fitch considers that this support would be unrestricted if it was ever required, especially given the strategic importance and the high integration of Berlin Hyp with LBB.
Fitch did not carry out a full review as described in its Global Financial Institutions Rating Criteria, but limited its review to an assessment on the bank's support-driven ratings.
The rating actions are as follows:
LBB:
Long-term IDR downgraded to 'A+' from 'AA-'; Outlook Stable
Short-term IDR affirmed at 'F1+'
Viability Rating unaffected at 'bbb-'
Individual Rating unaffected at 'C/D',
Support Rating affirmed at '1'
Support Rating Floor downgraded to 'A+' from 'AA-' and Withdrawn
Guaranteed obligations unaffected at 'AAA'
Guaranteed market-linked securities unaffected at 'AAA emr'
Senior Unsecured Debt downgraded to 'A+' from 'AA-'
Subordinated lower Tier II debt downgraded to 'A' from 'A+'
Berlin Hyp:
Long-term IDR downgraded to 'A+' from 'AA-'; Outlook Stable
Short-term IDR affirmed at 'F1+'
Viability Rating unaffected at 'bbb-'
Individual Rating unaffected at 'C/D'
Support Rating affirmed at '1'
Senior Unsecured Debt downgraded to 'A+' from 'AA-'
In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Viability Rating and the prospect of external support is reflected in Fitch's Support Ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable criteria 'Global Financial Institutions Rating Criteria', dated 16August 2011, and "Rating Criteria for Banking Structures Backed by Mutual Support Mechanisms" dated 14 April 2011 are available at www.fitchratings.com.
Related Research: Fitch Comments on Support for Euro Banks; Takes Various Support-Driven Rating Actions
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
Rating Criteria for Banking Structures Backed by Mutual Support Mechanisms
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=591785
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