(The following statement was released by the rating agency)
FRANKFURT/LONDON, February 10 (Fitch) Fitch Ratings has affirmed
AG's (HVB) Long-term Issuer Default Rating (IDR) at 'A+' and
(VR) at 'a-'. The Outlook on the Long-term IDR is Stable. A full
list of rating
actions is at the end of this release.
KEY RATING DRIVERS - IDRs, SUPPORT RATINGS, SUPPORT RATING
FLOORS AND SENIOR
HVB's Long-term and Short-term IDR, SR, SRF and senior debt
Fitch's view that its status as a large universal bank in
Germany results in an
extremely high probability of state support, as indicated by the
Floor (SRF) of 'A+'.
HVB is fully owned by Unicredit S.p.A. (UC: BBB+/F2) which is
notches below HVB following the downgrade of Italy on 8 March
2013. Given its
ownership structure, Fitch believes HVB would first look to UC
for support, if
needed. Nonetheless, Fitch expects that the German government
support HVB if UC's resources were insufficient.
HVB's foreign ownership does not constrain Fitch's view of local
support for the bank as it has a domestic franchise, is managed
independently and funds itself independently from its parent.
The Stable Outlook reflects Fitch's expectation that the German
continue to support large German banks, including HVB, as long
as the tools for
dealing with resolution of large international banks are not
RATING SENSITIVITIES - IDRs, SUPPORT RATINGS, SUPPORT RATING
FLOORS AND SENIOR
Fitch's view on support is sensitive to developments within the
legal framework, particularly emanating from the European
Commission with regard
to bank support, bail-ins, centralised regulatory oversight and
deposit insurance schemes, and the developing attitude of the
towards using these tools.
Fitch understands that there is broad political will in Germany,
all major parties, to move towards reducing the implicit state
systemically important banks in the country at some point. In
European Union discussion on the Bank Recovery and Resolution
Directive and the
Single Resolution Mechanism aspect of Banking Union are drawing
to a close, with
European Parliament votes scheduled for 1Q14 and representing
important steps to
curb systemic risks posed by the banking industry (see 'Fitch
for Addressing Support in Bank Ratings', 'Bank Support: Likely
'The Evolving Dynamics of Support for Banks' at
''Sovereign Support for Banks Update on Position Outlined In
follows Germany's implementation of a Restructuring Act in 2011.
does not expect to immediately remove support incorporated into
EU bank ratings,
these developments highlight potential risks for HVB's IDR and
HVB's SRF would be revised down and its Support Rating, IDRs and
ratings downgraded if Fitch concludes that potential sovereign
weakened relative to its previous assessment. Given HVB's VR is
support-driven downgrade of the bank's Long-term IDR and senior
would be limited to two notches.
KEY RATING DRIVERS AND SENSITIVITIES - VR
HVB's VR reflects the bank's standalone credit strength, which
benefits from its
well-established domestic corporate and investment banking
franchise and strong
capitalisation, which compensates for the intrinsic earnings
volatility of these
activities. HVB's solid capitalisation is a key rating strength
expects the bank's capital position to remain strong under
regulatory changes, including further progress on banking union,
forecast business development. Therefore, HVB's VR is sensitive
to any weakening
in core capital ratios.
Fitch would downgrade HVB's VR if it believed that cross-border
capital and liquidity would only be one-way, reserves were
further reduced after
the special dividend paid out in 2013 and HVB's investment and
profile and capitalisation level were unbalanced.
Being part of UniCredit group might pose potential contagion
risk for HVB's
funding franchise if the European sovereign crisis intensified
again, which is
not Fitch's base case assumption as the agency expects a weak
recovery in 2014.
At the same time, HVB has limited its direct funding exposure
Reflecting the German focus of its exposures, HVB's asset
its loan impairment charges, continue to benefit from the
economy. At the same time, HVB has a relatively higher ratio of
loans (NPL/gross loans) which it has not reduced as actively as
its peers have.
Fitch expects this trend to continue in the coming quarters. In
some risk pockets remain, including from high concentrations in
leveraged buyout exposure, project finance business and ship
Non-strategic assets are being worked out and the bank continues
to reduce its
exposure to riskier asset classes.
A subsidiary's VR will not normally be more than three notches
parent's IDR. As a result, further downgrades of UC, potentially
further downgrades of Italy, could result in a downgrade of
KEY RATING DRIVERS AND RATING SENSITIVITIES - SUBORDINATED DEBT
AND OTHER HYBRID
The ratings of HVB's hybrid capital instruments (issued through
Funding Trusts I
and II) reflect the financial standing of HVB, as reflected in
its VR. They are
notched down four notches from HVB's VR, reflecting two notches
severity and two notches for incremental non-performance risk
relative to the
While Fitch acknowledges that the German regulator could demand
a deferral of
coupon payment on these profit-linked instruments in line with
the terms and
conditions of the instruments, the agency does not anticipate
in light of the bank's solid standalone financial profile.
SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND
UniCredit US Finance LLC is a wholly owned subsidiary of HVB.
rating of its Commercial Paper Programme is equalised with HVB's
and reflects the likelihood of systemic support. The Short-term
rating of the
commercial paper programme is sensitive to the same factors that
might drive a
change in HVB's IDR.
The ratings actions are as follows:
UniCredit Bank AG
Long-term IDR affirmed at 'A+'; Outlook Stable
Short-term IDR affirmed at 'F1+'
Viability Rating affirmed at 'a-'
Support Rating Floor affirmed at 'A+'
Support Rating affirmed at '1'
Senior unsecured Certificates of Deposit affirmed at 'F1+'
Senior unsecured Debt Issuance Programme affirmed at 'A+'
Senior unsecured Debt Issuance Programme affirmed at 'F1+'
Senior unsecured BMTN Programme affirmed at 'A+'
Senior unsecured EMTN Programme affirmed at 'A+'
Senior unsecured EMTN Programme affirmed at 'A+'
Senior unsecured EMTN Programme affirmed at 'F1+'
Senior unsecured notes affirmed at 'A+'
Senior unsecured GTD notes affirmed at 'A+'
Subordinated notes affirmed at 'BBB+'
UniCredit US Finance LLC Commercial Paper Programme affirmed at
HVB Funding Trusts I and II Hybrid Notes affirmed at 'BB+'
+49 69 7680 76 113
Fitch Deutschland GmbH
60325 Frankfurt am Main
Christian van Beek
+49 69 76 80 76 248
Erwin van Lumich
+34 93 323 8403
Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153,
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Global Financial Institutions Rating
Criteria', dated 31
January 2014, and 'Rating FI Subsidiaries and Holding Companies'
dated 10 August
2012 are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Rating FI Subsidiaries and Holding Companies
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