DBRS Confirms Landesbank Berlin Rating at A; Stable Trend

DBRS Ratings Limited (DBRS) has today confirmed the ratings for Landesbank Berlin AG (LBB AG or the Bank), including its Issuer & Senior Long-Term Debt rating of A, its Subordinated Debt rating of A (low) and its Short-Term Instruments rating of R-1 (low). The Trend on all ratings is Stable.

The ratings for LBB AG are based on the Bank’s full ownership by the German savings banks and on DBRS’ floor rating for members of the joint liability scheme of the Sparkassen-Finanzgruppe. In DBRS’ view, LBB AG has strategic importance for the savings banks, which is underpinned by the Bank’s strong retail and regional franchise in Berlin and Brandenburg, as well as LBB AG’s transformation into a savings bank under the Berliner Sparkasse brand. DBRS expects that in a stress scenario, support would be made available to LBB AG from its ultimate owners, the German Savings Banks, as well as from the joint liability scheme of the savings bank group. As such, the Support Assessment for LBB AG has been changed to SA1 from SA3 in order to better reflect the Bank’s ownership.

DBRS has maintained the intrinsic assessment (IA) of BBB (high) for LBB AG, which considers the strengthening standalone financial profile of the Bank. The IA also reflects the Bank’s strong regional retail and commercial banking franchise and the significant de-risking of its activities in 2014 and 2015 following the transfer of most of its non-Berlin area real estate business to BerlinHyp and the parallel reduction in capital markets business, in part via the transfer of activity to DekaBank. DBRS expects that positive pressure on the IA could result after a track-record of stable earnings is established following completion of the Bank’s transformation in late 2016-2017. However, negative pressure on the IA could result should LBB’s financial strength deteriorate, or should its franchise weaken.

Despite improving fundamentals at LBB, upside for the final ratings is unlikely as the ratings already benefit from two notches of uplift from the Intrinsic Assessment (IA) due to the parental support described above. Downside rating pressure would only develop should the cohesion and strength of the savings bank sector deteriorate and/or the importance of LBB to the group were to decline.

Notes:
All figures are in EUR unless otherwise noted.
The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (June 2015). Other applicable methodologies include the DBRS Criteria: Support Assessments for Banks and Banking Organisations (March 2015) and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2015). These can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance.

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Peter Burbank
Rating Committee Chair: Roger Lister
Initial Rating Date: January 22, 2007
Most Recent Rating Update: September 29, 2015

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