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TEXT-Fitch affirms Commerzbank at 'A+';outlook stable
In addition, the European Commission's 6 June 2012 paper proposing to avoid future bank bail outs represents another important step in a series of policy and regulatory initiatives to curb systemic risk posed by the banking industry. This follows Germany's implementation of a Restructuring Act in 2011. Although Fitch does not expect to immediately remove the explicit uplift it factors into some EU bank ratings, these developments highlight the potential risks for Commerzbank's IDRs and senior debt ratings.
Fitch's ratings currently still use a base case assumption that the eurozone will "muddle through" as a currency union and no Greek exit, but heightened risk of the latter. If Greece were to exit, the impact on Commerzbank's IDRs and VR would depend on the effectiveness of the policy response. Because Commerzbank's IDR is at its Support Rating Floor, a negative rating action on the German sovereign would most likely drive similar actions on Commerzbank's ratings, similar to other banks' IDRs based on their Support Rating Floors.
The affirmation of Commerzbank'sVR reflects the bank's progress with its extensive restructuring plans, specifically maintaining profitability in previously underperforming segments like private banking or further strengthening its corpoare banking franchise in Germany. Altough Commerzbank is now better positioned to protect its franchise in a competitive domestic market, its non-core assets still pose substantial downside risks.
Commerzbank's performance in the past two years has been helped by the favourable German economy and notably the very low number of corporate insolvencies. However, Commerzbank is still exposed to concentration risks and troubled European markets, which absorbed a substantial share of its profits in recent years.
The VR is most sensitive to contagion risks from developments in southern European countries following a potential exit of Greek exit from the euro. If that were to happen. Fitch expects that Commerzbank would be able to absorb a potential deterioration of the asset quality in its core businesses, but the downside risks on non-core commercial real estate, shipping and public sector assets is still considerable. Fitch notes that further successful deleveraging of its non-core assets, specifically of its exposure in southern Europe, or a solution of the European sovereign crisis would result in upside potential for Commerzbank'sVR.
Commerzbank's subsidiaries' ratings are unaffected by today's rating actions.
The ratings actions are as follows:
Long-term IDR: affirmed at 'A+'; Outlook Stable
Short-term IDR: affirmed at 'F1+'
Viability Rating: affirmed at 'bbb-',
Support Rating: affirmed at '1'
Support Rating Floor: affirmed at 'A+'
Commercial paper and Certificates of Deposits: affirmed at 'F1+'
Senior unsecured debt: affirmed at 'A+'
Market-linked securities: affirmed at 'A+emr'
Subordinated debt (Lower Tier 2): affirmed at 'BB+'
Subordinated debt (Dresdner Funding Trust IV): affirmed at 'BB-'
Commerzbank U.S. Finance, Inc.'s Short-term rating: Affirmed at 'F1+'
Actions on hybrid capital instruments issued by Commerzbank:
Dresdner Funding Trust I's dated silent participation certificates: affirmed at 'B+'.
Commerzbank Capital Funding Trust I and II: affirmed at 'CCC'
UT2 Funding plc upper Tier 2 securities: affirmed at 'CCC'
HT1 Funding GmbH Tier 1 Securities: affirmed at 'CCC'
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