DBRS Ratings GmbH (DBRS Morningstar) assigned first-time ratings to NORD/LB Luxembourg S.A. Covered Bond Bank (NORD/LB CBB or the Bank), including Issuer Ratings at A (high) / R-1 (middle). The trend on all ratings is Stable, in line with the trend on NORD/LB’s Issuer Ratings. NORD/LB Luxembourg’s Support Assessment is SA1.
KEY RATING CONSIDERATIONS
The ratings for NORD/LB CBB take into account the ratings of its parent Norddeutsche Landesbank Girozentrale (NORD/LB). NORD/LB CBB is a 100% owned subsidiary of NORD/LB. NORD/LB has issued a letter of comfort (Patronatserklärung) to NORD/LB CBB and we consider NORD/LB CBB highly integrated, in terms of liquidity and funding, capitalisation, bilateral services and other aspects, consequently the ratings are equalised with NORD/LB’s ratings.
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 (high) with a Stable trend. In 2019 NORD/LB underwent a recapitalisation and announced a far-reaching restructuring programme, which also has implications for NORD/LB CBB.
As of 2022 there will not be any new loans transferred to NORD/LBB CBB and the Bank will not issue any new covered bonds. The Bank will continue to the purchase of assets as well as Fixed Income Relationship Management & Sales Europe till 2024. In the future the focus of the Bank will be on administration of existing portfolios and to ensure operational stability. NORD/LB CBB will remain an integral part of NORD/LB.
An upgrade of NORD/LB CBB’s rating would be linked to an upgrade of NORD/LB, which is driven by Sparkassen-Finanzgruppe’s floor rating.
A downgrade of NORD/LB’s ratings driven by Sparkassen-Finanzgruppe’s floor rating would also lead to a downgrade of NORD/LB CBB’s ratings. Any indication of a reduction of support from the Parent could impact DBRS Morningstar’s support assessment, and have a negative impact on NORD/LB CBB’s ratings.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Credit rating actions on Norddeutsche Landesbank Girozentrale (NORD/LB) are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of NORD/LB are discussed separately at https://www.dbrsmorningstar.com/issuers/20828.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (23 June 2022) https://www.dbrsmorningstar.com/research/398692/global-methodology-for-rating-banks-and-banking-organisations. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022) https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings
The sources of information used for this rating include Morningstar Inc. and Company Documents, NORD/LB CBB 2017-2021 Annual Reports. DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.
This rating concerns a newly rated issuer. This is the first DBRS Morningstar rating on this issuer.
With respect to FCA and ESMA regulations in the United Kingdom and European Union, respectively, this is an unsolicited credit rating. This credit rating was not initiated at the request of the issuer.
With Rated Entity or Related Third-Party Participation: NO
With Access to Internal Documents: NO
With Access to Management: NO
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.
The conditions that lead to the assignment of a Negative or Positive trend are generally 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: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.
The sensitivity analysis of the relevant key rating assumptions can be found at: https://www.dbrsmorningstar.com/research/400828.
This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.
Lead Analyst: Sonja Förster, CFA, Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman - Managing Director, Head of European FIG - Global FIG
Initial Rating Date: August 1, 2022
Last Rating Date: Not applicable as there is no last rating date.
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