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German Landesbank Helaba And SFHT Group ... - Sparkasse Wetzlar

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Research Update:<br />

<strong>German</strong> <strong>Landesbank</strong> <strong>Helaba</strong> <strong>And</strong><br />

<strong>SFHT</strong> <strong>Group</strong> Banks Affirmed At<br />

'A/A-1' On Acquisition Of WestLB's<br />

Assets; Outlook Stable<br />

Primary Credit Analyst:<br />

Harm Semder, Frankfurt (49) 69-33-999-158; harm_semder@standardandpoors.com<br />

Secondary Contact:<br />

Stefan Best, Frankfurt (49) 69-33-999-154; stefan_best@standardandpoors.com<br />

Table Of Contents<br />

Overview<br />

Rating Action<br />

Rationale<br />

Outlook<br />

Ratings Score Snapshot<br />

Related Criteria <strong>And</strong> Research<br />

Ratings List<br />

www.standardandpoors.com 1<br />

© Standard & Poor's. All rights reserved. No reprint or dissemination without Standard & Poor’s permission.<br />

See Terms of Use/Disclaimer on the last page.<br />

986283 | 300642892


Research Update:<br />

<strong>German</strong> <strong>Landesbank</strong> <strong>Helaba</strong> <strong>And</strong> <strong>SFHT</strong> <strong>Group</strong><br />

Banks Affirmed At 'A/A-1' On Acquisition Of<br />

WestLB's Assets; Outlook Stable<br />

Overview<br />

• <strong>German</strong> <strong>Landesbank</strong> Hessen-Thueringen Girozentrale (<strong>Helaba</strong>) has taken over<br />

WestLB's business with savings banks and parts of its business with<br />

public-sector and midsize corporate clients.<br />

• In our view, this transaction has no immediate impact on the <strong>SFHT</strong> group's<br />

credit profile.<br />

• We are affirming our 'A/A-1' ratings on the core member banks of the<br />

<strong>Sparkasse</strong>n-Finanzgruppe Hessen-Thueringen (<strong>SFHT</strong>) including their central<br />

bank, <strong>Helaba</strong>.<br />

• The stable outlook reflects our assessment that the financial profiles of<br />

<strong>SFHT</strong> and <strong>Helaba</strong> will stay relatively resilient under increasingly<br />

difficult market conditions, and are less likely to change over the next<br />

one to two years.<br />

Rating Action<br />

On July 10, 2012, Standard & Poor's Ratings Services affirmed its 'A'<br />

long-term and 'A-1' short-term counterparty credit ratings on the core member<br />

banks of <strong>German</strong>y-based <strong>Sparkasse</strong>n-Finanzgruppe Hessen-Thueringen (<strong>SFHT</strong>),<br />

including the regional savings banks and their central bank <strong>Landesbank</strong><br />

Hessen-Thueringen Girozentrale (<strong>Helaba</strong>). The outlook is stable.<br />

Rationale<br />

The affirmation follows the <strong>Helaba</strong>'s acquisition of about €40 billion of<br />

WestLB AG's business with savings banks and parts of its business with<br />

public-sector and midsize corporate clients, which will retroactively become<br />

effective on July 1, 2012. <strong>Helaba</strong> acquired the assets for €1 billion below<br />

book value in a noncash deal. As a result, <strong>Helaba</strong> will be 19% owned on<br />

aggregate by the two national savings bank associations in North<br />

Rhine-Westphalia (Rheinischer <strong>Sparkasse</strong>n- und Giroverband and,<br />

<strong>Sparkasse</strong>nverband Westfalen-Lippe) and the nationwide <strong>German</strong> Savings Banks<br />

Association.<br />

In our view, this transaction has no immediate impact on our view of <strong>SFHT</strong>'s<br />

group credit profile, which remains 'a', reflecting our view of the member<br />

banks' aggregate creditworthiness and expected solidarity support under<br />

stress. We continue to base our ratings on the banks in the <strong>SFHT</strong> group on the<br />

Standard & Poor’s | Research | July 10, 2012 2<br />

© Standard & Poor's. All rights reserved. No reprint or dissemination without Standard & Poor’s permission. See Terms of Use/Disclaimer on the last page. 986283 | 300642892


Research Update: <strong>German</strong> <strong>Landesbank</strong> <strong>Helaba</strong> <strong>And</strong> <strong>SFHT</strong> <strong>Group</strong> Banks Affirmed At 'A/A-1' On Acquisition Of<br />

WestLB's Assets; Outlook Stable<br />

group's aggregate "adequate" business position, "strong" capital and earnings,<br />

"adequate" risk position, "average" funding, and "adequate" liquidity, as our<br />

criteria define these terms.<br />

We believe this transaction could expand <strong>Helaba</strong>'s role as central bank for the<br />

savings banks in the <strong>German</strong> states of North Rhine-Westphalia (AA-/Stable/A-1+)<br />

and Brandenburg (not rated) and its importance to the nationwide savings banks<br />

sector. Whether this could add stability or diversity to <strong>Helaba</strong>'s business<br />

profile or improve its access to stable funding from the savings banks remains<br />

to be seen. Our ratings assume that <strong>Helaba</strong>'s governance and strategy will not<br />

be adversely affected by the new ownership structure<br />

The transaction does not undermine our assessment of the <strong>SFHT</strong> group's earnings<br />

and capital as "strong" and its risk position as "adequate". We base this on<br />

our unchanged expectation that the <strong>SFHT</strong> group's aggregate risk-adjusted<br />

capital (RAC) ratio, before the diversification benefit, will continue to<br />

improve to somewhat higher than 10% by year-end 2012. We estimate that our RAC<br />

ratio should slightly improve, because <strong>Helaba</strong> will assume generally lower-risk<br />

assets.<br />

Outlook<br />

The stable outlook reflects our assessment that the financial profiles of <strong>SFHT</strong><br />

and <strong>Helaba</strong> will stay relatively resilient under increasingly difficult market<br />

conditions and are less likely to change over the next one to two years. It<br />

also reflects our opinion that the solidarity support within the <strong>SFHT</strong> group<br />

remains unchanged and that the group's capitalization will gradually<br />

strengthen. We also consider underlying risk from the acquisition of parts of<br />

WestLB to be manageable.<br />

We could take negative rating actions if we saw a risk that the <strong>SFHT</strong> group's<br />

cohesiveness, risk culture, aggregate creditworthiness, and solidarity support<br />

were weakening, due to the increased businesses and diluted ownership<br />

structure. This could occur if, for example, a materially weaker capital<br />

generation capacity did not allow the group to achieve higher capital targets,<br />

if unexpected asset-quality problems led us to revise our view on the risk<br />

position, or if the savings banks' margins and business position were to<br />

significantly erode.<br />

We consider an upgrade unlikely at present, given <strong>Helaba</strong>'s sizable business<br />

and wholesale concentrations within the <strong>SFHT</strong>.<br />

Ratings Score Snapshot<br />

Issuer Credit Rating A/Stable/A-1<br />

<strong>Group</strong> Credit Profile a<br />

www.standardandpoors.com 3<br />

© Standard & Poor's. All rights reserved. No reprint or dissemination without Standard & Poor’s permission. See Terms of Use/Disclaimer on the last page. 986283 | 300642892


Research Update: <strong>German</strong> <strong>Landesbank</strong> <strong>Helaba</strong> <strong>And</strong> <strong>SFHT</strong> <strong>Group</strong> Banks Affirmed At 'A/A-1' On Acquisition Of<br />

WestLB's Assets; Outlook Stable<br />

Anchor a-<br />

Business Position Adequate (0)<br />

Capital and Earnings Strong (+1)<br />

Risk Position Adequate (0)<br />

Funding and Liquidity Average and Adequate (0)<br />

Support 0<br />

GRE Support 0<br />

<strong>Group</strong> Support 0<br />

Sovereign Support 0<br />

Additional Factors 0<br />

Related Criteria <strong>And</strong> Research<br />

All articles listed below are available on RatingsDirect on the Global Credit<br />

Portal, unless otherwise stated.<br />

Related research<br />

• <strong>German</strong> State of North Rhine-Westphalia Affirmed At 'AA-/A-1+' On Transfer<br />

Of WestLB's Remaining Assets; Outlook Stable, July 10, 2012<br />

• <strong>German</strong>y-Based Erste Abwicklungsanstalt 'AA-/A-1+' Ratings Affirmed On<br />

Asset Transfer; Outlook Stable, July 10, 2012<br />

• <strong>German</strong> <strong>Landesbank</strong> WestLB Unsolicited 'BBB/A-2' Ratings Withdrawn On<br />

Planned Transfer Of Remaining Assets, July 10, 2012<br />

• Outlook On <strong>German</strong> Mortgage Lender Westdeutsche ImmobilienBank To Stable<br />

On Transfer To EAA; 'BBB-/A-3' Ratings Affirmed, July 10, 2012<br />

Related criteria<br />

• Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010<br />

• Principles Of Credit Ratings, Feb. 16, 2011<br />

• Bank Hybrid Capital Methodology <strong>And</strong> Assumptions, Nov. 1, 2011<br />

• Banks: Rating Methodology <strong>And</strong> Assumptions, Nov. 9, 2011<br />

• Banking Industry Country Risk Assessment Methodology <strong>And</strong> Assumptions,<br />

Nov. 9, 2011<br />

• <strong>Group</strong> Rating Methodology <strong>And</strong> Assumptions, Nov. 9, 2011<br />

Ratings List<br />

Ratings Affirmed<br />

<strong>Landesbank</strong> Hessen-Thueringen Girozentrale<br />

Counterparty Credit Rating A/Stable/A-1<br />

Senior Unsecured A<br />

Commercial Paper A-1<br />

Certificate Of Deposit A/A-1<br />

<strong>Helaba</strong> Dublin <strong>Landesbank</strong> Hessen-Thueringen International<br />

Counterparty Credit Rating A/Stable/A-1<br />

Standard & Poor’s | Research | July 10, 2012 4<br />

© Standard & Poor's. All rights reserved. No reprint or dissemination without Standard & Poor’s permission. See Terms of Use/Disclaimer on the last page. 986283 | 300642892


Research Update: <strong>German</strong> <strong>Landesbank</strong> <strong>Helaba</strong> <strong>And</strong> <strong>SFHT</strong> <strong>Group</strong> Banks Affirmed At 'A/A-1' On Acquisition Of<br />

WestLB's Assets; Outlook Stable<br />

Certificate Of Deposit A/A-1<br />

Kasseler <strong>Sparkasse</strong><br />

Wartburg-<strong>Sparkasse</strong><br />

Taunus-<strong>Sparkasse</strong><br />

Staedtische <strong>Sparkasse</strong> Offenbach am Main<br />

Stadtsparkasse Grebenstein<br />

Stadtsparkasse Felsberg<br />

Stadt- und Kreis-<strong>Sparkasse</strong> Darmstadt<br />

<strong>Sparkasse</strong> Werra-Meissner<br />

<strong>Sparkasse</strong> Waldeck-Frankenberg<br />

<strong>Sparkasse</strong> Unstrut-Hainich<br />

<strong>Sparkasse</strong> Starkenburg<br />

<strong>Sparkasse</strong> Sonneberg<br />

<strong>Sparkasse</strong> Mittelthueringen<br />

<strong>Sparkasse</strong> Marburg-Biedenkopf<br />

<strong>Sparkasse</strong> Jena-Saale-Holzland<br />

<strong>Sparkasse</strong> Hanau<br />

<strong>Sparkasse</strong> Gruenberg<br />

<strong>Sparkasse</strong> Gera-Greiz<br />

<strong>Sparkasse</strong> Fulda<br />

<strong>Sparkasse</strong> Dillenburg<br />

<strong>Sparkasse</strong> Dieburg<br />

<strong>Sparkasse</strong> Bensheim<br />

<strong>Sparkasse</strong> Battenberg<br />

<strong>Sparkasse</strong> Altenburger Land<br />

Nassauische <strong>Sparkasse</strong><br />

Naspa Dublin<br />

Kreissparkasse Weilburg<br />

Kreissparkasse Schwalm-Eder<br />

Kreissparkasse Schluechtern<br />

Kreissparkasse Saalfeld-Rudolstadt<br />

Kreissparkasse Saale-Orla<br />

Kreissparkasse Nordhausen<br />

Kreissparkasse Limburg<br />

Kreissparkasse Gelnhausen<br />

Kreissparkasse Eichsfeld<br />

Stadtsparkasse Schwalmstadt<br />

Stadtsparkasse Borken<br />

<strong>Sparkasse</strong> <strong>Wetzlar</strong><br />

<strong>Sparkasse</strong> Rhoen-Rennsteig<br />

<strong>Sparkasse</strong> Odenwaldkreis<br />

<strong>Sparkasse</strong> Oberhessen<br />

<strong>Sparkasse</strong> Laubach-Hungen<br />

<strong>Sparkasse</strong> Langen-Seligenstadt<br />

<strong>Sparkasse</strong> Giessen<br />

<strong>Sparkasse</strong> Bad Hersfeld-Rotenburg<br />

<strong>Sparkasse</strong> Arnstadt-Ilmenau<br />

Kyffhaeusersparkasse<br />

Kreissparkasse Hildburghausen<br />

www.standardandpoors.com 5<br />

© Standard & Poor's. All rights reserved. No reprint or dissemination without Standard & Poor’s permission. See Terms of Use/Disclaimer on the last page. 986283 | 300642892


Research Update: <strong>German</strong> <strong>Landesbank</strong> <strong>Helaba</strong> <strong>And</strong> <strong>SFHT</strong> <strong>Group</strong> Banks Affirmed At 'A/A-1' On Acquisition Of<br />

WestLB's Assets; Outlook Stable<br />

Kreissparkasse Gross-Gerau<br />

Kreissparkasse Gotha<br />

Frankfurter <strong>Sparkasse</strong><br />

Counterparty Credit Rating A/Stable/A-1<br />

Certificate Of Deposit A/A-1<br />

Additional Contact:<br />

Financial Institutions Ratings Europe; FIG_Europe@standardandpoors.com<br />

Complete ratings information is available to subscribers of RatingsDirect on<br />

the Global Credit Portal at www.globalcreditportal.com. All ratings affected<br />

by this rating action can be found on Standard & Poor's public Web site at<br />

www.standardandpoors.com. Use the Ratings search box located in the left<br />

column. Alternatively, call one of the following Standard & Poor's numbers:<br />

Client Support Europe (44) 20-7176-7176; London Press Office (44)<br />

20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm<br />

(46) 8-440-5914; or Moscow 7 (495) 783-4009.<br />

Standard & Poor’s | Research | July 10, 2012 6<br />

© Standard & Poor's. All rights reserved. No reprint or dissemination without Standard & Poor’s permission. See Terms of Use/Disclaimer on the last page. 986283 | 300642892


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