Press Release

DBRS Morningstar Confirms NORD/LB’s Issuer Ratings at A/R-1 (low), Trend Remains Positive

Banking Organizations
December 08, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed the ratings for Norddeutsche Landesbank Girozentrale (NORD/LB or the Bank), including the Long-Term Issuer Rating at “A” and the Short-Term Issuer Rating at R-1 (low). The trend on all ratings remains Positive. The ratings and the trend are all in line with the broader Sparkassen-Finanzgruppe (SFG). The Intrinsic Assessment (IA) was maintained at BBB (low) and the Support Assessment remains unchanged at SA1. For a complete list of ratings, please see the table at the end of this press release.


The confirmation of NORD/LB’s ratings reflects its membership in the SFG and in the Institutional Protection Scheme (IPS) of the SFG. Each member of the IPS, including NORD/LB, is generally rated at the floor level, which is currently “A” with a Positive trend.

The IA takes into account NORD/LB’s well established franchise as a commercial bank in the region of Northern Germany, its role as a central institution and clearing bank for the savings banks in this region, as well as a global footprint in its specialty finance business. The Bank also benefits from a solid liquidity position due to its membership in the SFG and its established covered bond franchise as well as a substantial capital buffer above regulatory minimum requirements. However, it also incorporates the limited earnings power and business diversification along with a large scale restructuring programme, which, although it has reduced credit risk to a large extent, continues to pose significant execution risk.


NORD/LB’s Issuer Ratings benefit from the SFG’s IPS. Any change in the ratings of the SFG would lead to a change in NORD/LB’s ratings.

An upgrade of the Intrinsic Assessment (IA) is unlikely in the short-term, given the significant execution risk involved in the current restructuring programme. However, if the Bank is successful in restoring sustainable profitability, while maintaining its current asset quality and capital, the IA would be upgraded.

The IA would be downgraded should the Bank experience a noticeable deterioration in revenues or fail to execute its restructuring programme in a timely manner, or if credit losses increase to an extent that it would lead to a significant reduction in the Bank’s capital buffer.


NORD/LB has a diverse corporate and commercial client base in Northern Germany, complemented by revenues from more global business lines. In early 2019, the bank embarked on a large-scale restructuring programme, including an exit from the shipping business which previously had been one of the Bank’s major business lines. DBRS Morningstar notes that this restructuring, which will significantly reduce the Bank’s total assets to about EUR 95 billion by end-2024, down from EUR 128 billion at end-September 2020, carries significant execution risk.

In DBRS Morningstar’s view NORD/LB’s earning generation ability remains under pressure, as the Bank’s balance sheet is shrinking as part of its far-reaching restructuring programme, the low interest rate environment is likely to last for a longer period of time, and the COVID-19 pandemic continues to affect the economic environment. For 9M 2020, NORD/LB reported a net loss of EUR 74 million, and the Bank is not expected to reach meaningful profitability until 2022. However, the expected losses for 2020 and 2021 are relatively small and mitigated by the fact that guarantee fees, paid by the Bank to the State of Lower Saxony, will be reinvested in the Bank in order to support capital formation.

DBRS Morningstar notes that NORD/LB has significantly improved its credit risk profile in recent years through divestments of risky assets and various portfolio guarantees. As a result, exposure to shipping has been virtually eliminated and more than half of the aviation portfolio is protected by guarantees. The Bank’s reported NPL ratio continued to improve to 1.6% at end-September 2020 from 2.0% at end-2019. However, given its wholesale banking franchise, the Bank continues to maintain sizeable exposures to cyclical sectors that include more lumpy exposures. With an exposure not subject to guarantees of EUR 1.9 billion, aircraft finance currently represents one of the Bank’s larger risks. Both credit risk and operational risk have increased as a result of the COVID-19 pandemic.

The predominantly wholesale funding profile is balanced by the established funding relationships within the SFG and the access to stable Pfandbrief funding. The balance sheet shrinkage will also reduce funding needs. As of end-Q3 2020 the LCR stood at 161.9%.

In DBRS Morningstar’s opinion NORD/LB’s sound capital cushion is partly offset by the fact that the Bank is currently not able to generate capital from earnings and has very limited ability to raise external capital. A fully-loaded CET1 ratio of 14.1% at the end of 9M 2020 positions NORD/LB at the upper end of its peer group and provides the Bank with a healthy buffer relative to its current SREP requirement of 8.92%. However, the capital cushion is needed given the risk related to the execution of the Bank’s ambitious restructuring programme, additional risks to revenues and credit from the COVID-19 pandemic as well as expected RWA inflation related to the final Basel III rules.


Corporate Governance is a material rating factor for the Sparkassen-Finanzgruppe and is reflected in the Franchise and Risk building blocks. In DBRS Morningstar’s view the decentralised structure and lack of consolidation of the Group reduces transparency, potentially limits risk control mechanisms and lowers efficiency.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

The Grid Summary Grades for Norddeutsche Landesbank Girozentrale are as follows: Franchise Strength – Moderate; Earnings Power – Moderate/Weak; Risk Profile – Moderate; Funding & Liquidity – Good; Capitalisation – Moderate/Weak

All figures are in EUR unless otherwise noted.

The principal methodology is the lobal Methodology for Rating Banks and Banking Organisations (8 June 2020)

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

The sources of information used for this rating include Company Documents, NORD/LB M9 2020 Presentation, NORD/LB H1 2020 Interim Report, NORD/LB 2019 Annual Report and S&P Global Market Intelligence. DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS Morningstar 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 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

The sensitivity analysis of the relevant key rating assumptions can be found at:

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Sonja Förster, Vice President, Global Financial Institutions Group
Rating Committee Chair: Ross Abercromby, Managing Director, Global Financial Institutions Group
Initial Rating Date: June 11, 2018
Last Rating Date: January 6, 2020

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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