Morningstar DBRS Confirms Credit Ratings on 345 Members of Sparkassen-Finanzgruppe’s IPS at A (high), Assigns New Credit Ratings to S-Kreditpartner GmbH, Discontinues Credit Ratings on 10 Members

DBRS Ratings GmbH (Morningstar DBRS) confirmed the Long-Term Issuer Ratings of 345 members of the Institutional Protectional Scheme (IPS) of the Sparkassen-Finanzgruppe (SFG or the Group) at A (high) following the confirmation of the floor ratings on SFG on 25 March 2025. The Short-Term Issuer Ratings were also confirmed at R-1 (middle). In addition, Morningstar DBRS assigned new credit ratings to S-Kreditpartner GmbH, as part of the IPS, in line with the floor ratings on SFG. At the same time, Morningstar DBRS discontinued the credit ratings on 10 institutions because of mergers. The trends on all credit ratings are Stable. A full list of the credit rating actions can be found at the end of this press release.

The full list of Morningstar DBRS-rated members of SFG now includes 346 entities of which 343 are Sparkassen with the other three being Landesbank Saar and Landesbausparkasse Saar (both building associations) and the newly rated S Kreditpartner GmbH.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations take into account the dominant position of the Sparkassen in the German retail banking space resulting from their extensive and resilient footprint, complemented by a number of specialised financial service providers and the wholesale-oriented Landesbanken. The ratings continue to be supported by solid asset quality metrics despite some deterioration in 2023 and 2024, at both Sparkassen and Landesbanken levels, reflecting the country’s sluggish economy and heightened geopolitical risks.

Furthermore, SFG maintains solid capital ratios above the German banking average. The Group’s liquidity position benefits from the granular and strong deposit franchise of the Sparkassen, supplemented by wholesale funding access at the larger savings banks and the Landesbanken.

The Group’s profitability levels have improved on the back of higher interest rates as well as successful de-risking at the Landesbanken. Nonetheless, SFG’s profitability metrics remain below the level of its international peers. This in part reflects the public mandate of its members as well as their complex structures.

The Stable trends reflect Morningstar DBRS’ expectation that the Group will keep its solid financial fundamentals, despite some deterioration in Germany’s economic environment.

The floor ratings indicate that each IPS member’s Issuer Rating is rated at the floor level; however, this does not prevent members from potentially either achieving higher individual ratings based on their individual credit assessment or receiving a lower rating if there is an increased likelihood of departure from the Group.

The floor ratings are based on the depth and resources of the IPS. In Morningstar DBRS’ view, the Group’s IPS reduces the default risk of each individual member by making financial resources available to each Group member in times of stress. However, Morningstar DBRS recognises that the IPS has limitations, as it does not equate to a legal cross-guarantee. These limitations are factored into the floor ratings.

Morningstar DBRS notes that the following mergers have taken place since March 2024:

-- Stadtsparkasse Wunstorf merged with Sparkasse Hannover with the resulting entity being named Sparkasse Hannover.
-- Kreissparkasse Grafschaft Diepholz merged with Kreissparkasse Syke with the resulting entity being named Kreissparkasse Diepholz.
-- Sparkasse Beckum-Wadersloh merged with Sparkasse Münsterland Ost with the resulting entity being named Sparkasse Münsterland Ost.
-- Sparkasse Arnsberg-Sundern merged with Sparkasse Hochsauerland and Sparkasse Mitten im Sauerland/Meschede with the resulting entity being named Sparkasse Mitten im Sauerland.
-- Kreissparkasse Halle merged with Kreissparkasse Wiedenbrück with the resulting entity being named Kreissparkasse Halle-Wiedenbrück.
-- Sparkasse Neuburg-Rain merged with Sparkasse Aichach-Schrobenhausen with the resulting entity being named Sparkasse Altbayern.
-- Sparkasse Donauwörth merged with Sparkasse Dillingen-Nördlingen with the resulting entity being named Sparkasse Nordschwaben.
-- Sparkasse Günzburg-Krumbach merged with Sparkasse Schwaben-Bodensee with the resulting entity being named Sparkasse Schwaben-Bodensee.
-- Sparkasse Miltenberg-Obernburg merged with Sparkasse Aschaffenburg-Alzenau with the resulting entity being named Sparkasse Aschaffenburg Miltenberg.

As a result of these mergers, the credit ratings of 10 savings banks were discontinued and withdrawn. These were Stadtsparkasse Wunstorf, Kreissparkasse Grafschaft Diepholz, Sparkasse Beckum-Wadersloh, Sparkasse Arnsberg-Sundern, Sparkasse Hochsauerland, Kreissparkasse Wiedenbrück, Sparkasse Neuburg-Rain, Sparkasse Donauwörth, Sparkasse Günzburg-Krumbach and Sparkasse Miltenberg-Obernburg.

In addition, the following six savings banks have changed their names to reflect the mergers: Kreissparkasse Diepholz from Kreissparkasse Syke, Kreissparkasse Halle-Wiedenbrück from Kreissparkasse Halle, Sparkasse Altbayern from Sparkasse Aichach-Schrobenhausen, Sparkasse Nordschwaben from Sparkasse Dillingen-Nördlingen, Sparkasse Mitten im Sauerland from Sparkasse Mitten im Sauerland/Meschede and Sparkasse Aschaffenburg Miltenberg from Sparkasse Aschaffenburg-Alzenau.

CREDIT RATING DRIVERS
Given the floor rating approach, the credit ratings will generally move in line with those of the Group.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Governance (G) Factors
The Governance factor has changed from the prior credit rating disclosure. Morningstar DBRS no longer views the Passed-Through Governance Credit Considerations subfactor as relevant to the credit ratings or trend assigned to SFG. This reflects Morningstar DBRS’ view that the risk profile of the Landesbanken has improved substantially over the past years. Nevertheless, the subfactor Corporate Governance remains relevant to the rating of SFG and this is reflected in the franchise grid grades for the Group.

In Morningstar DBRS’ view, the ownership mix and the parliamentary process involved in decision making at the Landesbanken has made it difficult at times for SFG to swiftly react to challenges. In addition, the level of transparency and financial disclosure of SFG is limited by international comparison.

There were no Environmental or Social factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024) at https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (4 June 2024), https://dbrs.morningstar.com/research/433881. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

The sources of information used for this credit rating include Morningstar, Inc. and company documents, Sparkassen-Finanzgruppe 2019-2023 Annual Reports, Bilanzpressekonferenz der Sparkassen 2025. Morningstar DBRS considers the information available to it for the purposes of providing this credit rating to be of satisfactory quality. Morningstar DBRS does not audit the information it receives in connection with the credit rating process, and it does not and cannot independently verify that information in every instance.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS’ outlooks and credit ratings are under regular surveillance.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

The sensitivity analysis of the relevant key credit rating assumptions can be found at: https://dbrs.morningstar.com/research/450607

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Nicola De Caro, Senior Vice President, Sector Lead, European Financial Institution Ratings
Rating Committee Chair: Elisabeth Rudman, Managing Director, Global Financial Institution Ratings
Initial Rating Date: 18 January 2007
Last Rating Date: 21 March 2024

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For more information on this credit or on this industry, visit https://dbrs.morningstar.com.