DBRS Confirms Landesbank Berlin AG at “A”; Trend Revised to Positive

DBRS Ratings Limited (DBRS) has confirmed the ratings of Landesbank Berlin AG (LBB or the Bank), including the Long-Term Issuer Rating at “A”, the Subordinated Debt rating at BBB (high) and the Short-Term Issuer Rating at R-1 (low). This follows the confirmation of the floor ratings for the Sparkassen-Finanzgruppe on March 27th, 2018. The Intrinsic Assessment (IA) remains at BBB (high) and the Support Assessment remains unchanged at SA1. The trend on all ratings was changed to Positive from Stable. For a complete list of ratings, please see the table at the end of this press release.

KEY RATING CONSIDERATIONS
The confirmation of the debt ratings reflects LBB’s full ownership by the German savings banks and its membership in the Institution Protection Scheme of the Sparkassen-Finanzgruppe. The change in the trend to Positive, from Stable, reflects the trend change for the Sparkassen-Finanzgruppe which reflects DBRS’s view that the profitability in the Sparkassen sector continues to show resilience despite the low interest rate environment, the further de-risking of the Landesbanken sector and the consistent progress the group has made in improving its capital position. See “DBRS Confirms “A” Floor Ratings on Sparkassen-Finanzgruppe, Trend Revised to Positive”, published on March 27th, 2018, for more details. DBRS has also maintained LBB’s IA at BBB (high).

RATING DRIVERS
LBB’s Issuer Ratings benefit from the Sparkassen-Finanzgruppe’s (SFG) Institution Protection Scheme. Any change in the A/ R-1 (low) floor rating level of the SFG would lead to a change in LBB’s ratings.

Upward movement in the IA is unlikely in the short-to-medium term given the pressure on capitalisation and the need to establish a track-record of stable risk adjusted earnings.

The IA could come under negative pressure should LBB’s financial strength deteriorate, in particular if there is an increase in the risk profile resulting from a significant further increase in LBB’s CRE portfolio relative to its loss absorbing capital. Any significant deterioration of the capitalisation at the Holding (S-Erwerbsgesellschaft) level translating into capitalisation pressure or risk transfer for LBB, would also negatively pressure LBB’s IA.

RATING RATIONALE
The IA reflects the Bank’s solid regional banking franchise and the progress made in recent years towards restructuring the Bank towards the regionally focused Berliner Sparkasse. It also reflects the improving, but still volatile, earnings profile, as well as the risks related to the Bank’s cyclical Commercial Real Estate (CRE) lending and sizeable security portfolio. The IA further reflects the Bank’s solid funding franchise based upon its solid regional retail deposit and Pfandbrief franchise as well as its improved capitalisation following restructuring and de-risking.
For more information on the DBRS rating floor see the DRBS Rating Report on the Sparkassen-Finanzgruppe.

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

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (May 2017). This can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include SNL Financial and company reports. DBRS considers the information available to it for the purposes of providing this rating to be 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 historical default rates published by the European Securities and Markets Authority (“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 and US regulations only.

Lead Analyst: George Yiannakis, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG, Global FIG
Initial Rating Date: January 22, 2007
Most Recent Rating Update: December 4, 2017

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