March 18, 2013 / 2:26 PM / 5 years ago

Fitch Maintains BHF-Bank on Rating Watch Negative

(The following statement was released by the rating agency) LONDON, March 18 (Fitch) Fitch Ratings has maintained BHF-Bank AG's Long- and Short-term Issuer Default Ratings (IDRs) of 'A-' and 'F2' and 'bbb' Viability Rating (VR) on Rating Watch Negative (RWN). A full list of rating actions is at the end of this rating action commentary. RATING ACTION RATIONALE Fitch first placed BHF's IDRs on RWN on 7 July 2011 to reflect the announcement that its parent, Deutsche Bank AG (DB; 'A+'/Stable), had entered into exclusive negotiations with financial investor RHJ (not rated) regarding a potential sale of BHF to RHJ's wholly-owned subsidiary Kleinwort Benson Group (KBG, not rated). The ratings remain on RWN pending a decision on the sale. KEY RATING DRIVERS - IDR AND SUPPORT RATING BHF's IDRs reflect Fitch's view that the likelihood of support from DB will remain high as long as DB remains BHF's ultimate majority owner. Should a sale to RHJ or one of its subsidiaries go ahead, Fitch would expect to downgrade BHF's Long-term IDR to the level of its VR, so by at least two notches. The RWN on BHF's VR reflects the uncertainty surrounding the future owner's intentions regarding BHF's strategy, positioning and restructuring and, related to this, Fitch's concerns about how the bank's franchise and earnings would develop under new ownership. Fitch's assessment of the appropriate rating and Outlook would focus on the new owner's business model and strategy for BHF, the implications for BHF's risk profile and BHF's ability to generate sustainable profit from a low risk profile and whether the liquidity cushion will be robust enough to absorb potential losses of customer deposits. RATING SENSITIVITIES - IDR AND VR In this context, Fitch notes that the bank has successfully de-risked its balance sheet with substantial support from DB. This includes the reduction of its securities portfolio, as well as measures taken to improve efficiency and refocus strategy on private banking as well as customer-driven advisory and lending activities. If the sale was aborted, which in Fitch's view is unlikely, the agency would expect DB to relinquish its sale endeavours and look to absorb the business into its own. Should this happen, Fitch would resolve the RWN and probably withdraw the VR. The uncertain fate of BHF's various business lines would limit the upside for the IDR. Fitch considers it difficult to predict the timing of a decision on the sale process and the outcome is still uncertain. Fitch expects to next review the ratings once the sale has been finalised. Resolving the RWN will also require an understanding of the new owner's future strategy with regard to BHF and its role in the wider group of RHJ. The rating actions are as follows: Long-term IDR 'A-' RWN maintained Short-term IDR 'F2' RWN maintained Viability Rating at 'bbb' RWN maintained Support Rating at '1' RWN maintained Contact: Primary Analyst Michael Dawson-Kropf Senior Director +49 69 768076 113 Fitch Deutschland GmbH Taunusanlage 17, 60325 Frankfurt am Main Secondary Analyst Patrick Rioual Director +49 69 7680 76 123 Committee Chairperson Erwin van Lumich Managing Director +34 93 323 8403 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. 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 15 August 2012, and 'Evaluating Corporate Governance', dated 12 December 2012, are available at www.fitchratings.com. Applicable Criteria and Related Research Global Financial Institutions Rating Criteria here Evaluating Corporate Governance 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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