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Fitch Affirms Hypothekenbank Frankfurt International at 'A-' on Merger
September 5, 2014 / 2:46 PM / 3 years ago

Fitch Affirms Hypothekenbank Frankfurt International at 'A-' on Merger

(The following statement was released by the rating agency) FRANKFURT/LONDON, September 05 (Fitch) Fitch Ratings has affirmed Hypothekenbank Frankfurt International's (HFI) Long-term Issuer Default Rating (IDR) at 'A-', Short-term IDR at 'F1' and Support Rating at '1'. The Outlook on the Long-term IDR is Negative. The bank is a subsidiary of Commerzbank AG (A+/Negative). The rating action follows the merger between HFI and Erste Europaische Pfandbrief- und Kommunalkreditbank Aktiengesellschaft in Luxemburg SA (EEPK), another Commerzbank subsidiary, on 1 September 2014. EEPK has ceased to exist as a separate entity and all of EEPK's assets and liabilities have been transferred in their entirety to HFI. HFI's name has been changed to Erste Europaische Pfandbrief- und Kommunalkreditbank Aktiengesellschaft in Luxemburg SA (new EEPK). Commerzbank became the direct parent of HFI in March 2014, before which HFI was indirectly owned by Commerzbank via Hypothekenbank Frankfurt AG (A-/Negative). In our view Commerzbank's direct ownership strengthens the linkage between Commerzbank and HFI. KEY RATING DRIVERS - IDRS and SR New EEPK is a subsidiary of Commerzbank and its ratings are directly correlated to those of its parent. Fitch views Commerzbank's support propensity as strong due to a letter of backing of new EEPK (Patronatserklarung) from Commerzbank and Fitch's opinion that failure to provide support would be highly damaging from a reputational perspective. Commerzbank's Long- and Short-term IDR, Support Rating (SR), and senior debt ratings reflect 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 a Support Rating Floor (SRF) of 'A+'. However, Commerzbank's SRF is likely to be revised to 'No Floor' over the next 12 months, which means that the IDRs for the two banks will likely be downgraded to the level of Commerzbank's Viability Rating (currently 'bbb'), subject to potential mitigating considerations mentioned in Fitch's commentary "Fitch Revises Outlooks on 18 EU Banks to Negative on Weakening Support", dated 26 March 2014. We expect to then equalise new EEPK's IDRs with those of Commerzbank on the assumption that Commerzbank maintains its strong links to new EEPK and continues to provide a high proportion of its funding and the letter of backing. New EEPK's business is being run down significantly and given its wind down status we do not view the bank's business model as viable on a standalone basis and therefore have not assigned a VR. There will be a separate rating action commentary with regard to new EEPK's covered bond ratings. RATING SENSITIVITIES - IDRs and SR New EEPK's rating sensitivities are the same as those for Commerzbank. Fitch believes that a sale of new EEPK by Commerzbank is highly unlikely. Should Commerzbank's SRF be revised down and its Support Rating and IDRs downgraded upon a perceived weakening of state support, new EEPK would also be downgraded. However, given Commerzbank's VR is 'bbb' - the level the German bank's IDR will be downgraded to - any support-driven downgrade of new EEPK's ratings would be limited to two notches. Contacts: Primary Analyst Michael Dawson-Kropf Senior Director +49 69 768 076 113 Fitch Deutschland GmbH Taunusanlage 17 60325 Frankfurt Secondary Analyst Krista Davies Associate Director +44 20 3530 1579 Committee Chairperson Gordon Scott Managing Director +44 20 3530 1075 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Applicable criteria, Global Financial Institutions Rating Criteria, dated 31 January 2014, are available at Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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