Research: Rating Action: Moody’s Subjects Raiffeisenbank Austria’s Ratings and Counterparty Risk Assessments for Review for Upgrade

Rating action follows review of Croatia’s sovereign ratings upgrade

Limassol, June 28, 2022 — Moody’s Investors Service (“Moody’s”) today placed Raiffeisenbank Austria dd (RBA) long-term counterparty risk (CRR) ratings (CRR) Baa2 and long-term Baa3(cr)/P and short-term -3(cr) Counterparty risk (CR) ratings under review for upgrade. At the same time, the rating agency affirmed all other ratings and assessments, including the bank’s ba2 Base Credit Assessment (BCA), its ba1 Adjusted BCA and Baa2/P-2 deposit ratings.

Today’s rating action follows the decision of the EU’s Economic and Financial Affairs Council on June 17 to recommend that Croatia adopt the euro as its national currency from January 1, 2023, prompting Moody’s to review the Croatian government’s Ba1 senior unsecured and issuer ratings. for an upgrade (see: Moody’s puts Croatia’s Ba1 ratings under review for an upgrade; https://ratings.moodys.com/ratings-news/389939).

A full list of affected ratings and reviews can be found at the end of this press release.

RATINGS RATIONALE

— REVIEW FOR UPGRADE OF CRR AND CR ASSESSMENTS

The upgrade review of the RBA’s CRR and CR ratings is driven by Croatia’s sovereign rating upgrade review and reflects the fact that these ratings and ratings are currently constrained by the government rating.

In line with Moody’s Banks methodology, the RBA’s Baa2 long-term CRR is limited to two notches above the government’s Ba1 rating. The RBA’s Baa3(cr) long-term CR rating is limited to one notch above the government rating, also in line with Moody’s methodology.

Without these constraints, the CRR and CR ratings would each have benefited from a three-notch increase in the RBA’s ba1-adjusted BCA based on Moody’s advanced loss-given-default (LGF) analysis.

— BCA AFFIRMATION AND ADJUSTED BCA

According to the rating agency, the decision to affirm the RBA’s ba2 BCA reflects the bank’s strong capital cushions, with a tangible common equity to risk-weighted asset ratio of 17.5% at the end of 2021, although Moody’s expects the ratio to decline as the RBA recovers. dividend distributions, a stable funding structure based on deposits and high liquidity. These strengths are moderated by relatively high asset risks, with problem loans equivalent to 4.8% of gross loans at the end of 2021 and relatively high credit costs throughout the cycle, and moderate and volatile profitability. . The RBA’s BCA also reflects the high risk of litigation from consumers who had borrowed in Swiss francs in the past and are suing the bank claiming to have suffered losses based on exchange rate differences, as well as compensation for changes in interest rates.

BCA adjusted ba1 continues to incorporate Moody’s assessment of a high likelihood of support from affiliates of Raiffeisen Bank International AG (RBI; long-term/senior unsecured bank deposits: A2/A2 stable, BCA: baa3), which results in a one-notch rating uplift.

— AFFIRMATION OF FILING RATINGS

The confirmation of the RBA’s Baa2 long-term deposit ratings follows the confirmation of the bank’s BCA and adjusted BCA and reflects the fact that these ratings are not currently capped by the sovereign rating.

RBA’s Baa2 rated deposits are positioned two notches above the ba1 adjusted BCA of Moody’s advanced LGF analysis which indicates very low loss given default reflecting the likely reduction in expected loss due to absorption losses provided by the substantial volume of deposits.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

The CRR and CR ratings could be improved at the end of the review, in case the Croatian government ratings are improved.

Upward pressure on the RBA’s ABC and therefore on the ratings could also result from a significant improvement in Croatia’s operating environment, for example as a result of the country joining the eurozone, as well as lower asset risk, significantly reduced litigation risk and sustainably stronger and more stable profitability indicators for the RBA, should sovereign ratings be upgraded.

CRR and CR ratings could be affirmed at their current levels following confirmation of Croatian government ratings at Ba1.

Downward pressure on the RBA’s BCA and hence ratings could be triggered by an unexpected deterioration in operating conditions, a significant deterioration in the bank’s asset quality and profitability measures, higher than expected legal costs or a significant reduction in the bank’s capital beyond what is currently expected.

A significantly reduced ability or willingness of the RBI to provide support to the RBA, or a change in the bank’s liability structure that reduces the improvement provided by Moody’s advanced LGF analysis could also lead to a ratings downgrade. .

LIST OF AFFECTED RATINGS

..Issuer: Raiffeisenbank Austria dd

Under review for upgrade:

….Long-term counterparty risk assessment, review for upgrade, currently Baa3(cr)

….Assessment of short-term counterparty risk, indictment for upgrade, currently P-3(cr)

….Long term counterparty risk ratings, under review for upgrade, currently Baa2

Statement:

….Base credit rating adjusted, confirmed ba1

….Basic credit assessment, Confirmed ba2

….Short Term Counterparty Risk Ratings, Confirmed P-2

….Long-term bank deposit ratings, Baa2 confirmed, outlook remains stable

….Short-term bank deposit ratings, confirmed P-2

Action Outlook:

….Outlook, changed to Notes under review of Stable

MAIN METHODOLOGY

The main methodology used in these ratings is the Methodology for Banks published in July 2021 and available on https://ratings.moodys.com/api/rmc-documents/71997. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been communicated to the rated entity or its designated agent(s) and issued without modification resulting from such communication.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Alexios Philippides
Vice President – Senior Analyst
Financial Institutions Group
Moody’s Investors Service Cyprus Ltd.
Porto Bello Building
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Box 53205
Limassol, CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454

Henry MacNevin
Associate General Manager
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454

Release Office:
Moody’s Investors Service Cyprus Ltd.
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Limassol, CY 3301
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Martin E. Berry