MünchenerHyp Downgraded due to Weak Profitability

Moody's Investors Service has downgraded Münchener Hypothekenbank eG's bank financial strength rating (BFSR) to D+ from C- (now mapping to Ba1 on the long-term rating scale from Baa2 previously). The downgrade of the BFSR triggered the downgrade of the senior debt and deposit ratings to A2 from A1.

Moody's has also affirmed MünchenerHyp's prime-1 short-term rating and downgraded the Tier 1 instruments issued by GFW Capital and Isar Capital Funding I Limited Partnership to Baa3 (hyb) from Baa2 (hyb). The outlook on all the ratings is stable, from negative previously.

The downgrade of the BFSR was driven by several considerations, including:

* The bank's persistently weak profitability and internal capital generation, which leaves limited room for unexpected losses.

* The bank's only adequate capitalisation in the context of its risk profile and its low quality of capital, which represents a challenge with regards to the upcoming Basel III requirements.

Furthermore, the bank remains exposed to ongoing asset-quality pressures at the current level from non-core portfolios such as international commercial real estate, as well as selected exposures within the bank's financial institutions and sovereign portfolio. Moody's believes that the challenges that MünchenerHyp faces are more consistent with a BFSR of D+, corresponding to Ba1 on the long-term rating scale.

Posted in: Market Analysis