Moody's on Oct. 5 upgraded DVB Bank SE's long-term senior unsecured debt rating to Aa3 from Baa1, its long-term deposit rating to Aa1 from A2, its long-term counterparty risk assessment to Aa1(cr) from A2(cr) and its adjusted baseline credit assessment to "a2" from "baa3."
The rating agency said it maintained the positive outlook on the long-term debt rating, as well as the stable outlook on the long-term deposit rating, as they mirror the outlooks on parent DZ BANK AG's ratings.
At the same time, Moody's affirmed DVB Bank's short-term deposit rating and short-term counterparty risk assessment at Prime-1 and Prime-1(cr), respectively.
The upgrades were driven by DZ BANK's announcement Sept. 26 that it plans to establish a formal control and profit-and-loss transfer agreement with DVB Bank, which Moody's said ensures the parent's absorption of any losses of the unit in 2017 and over the next five years.
The agency noted that it expects the agreement, which is to take retroactive effect as of Jan. 1, to be approved by DZ BANK's extraordinary shareholders meeting to be held Nov. 2, and that it considers the risk of obstacles to the approval to be remote.
Moody's added that the upgrade takes into account that DVB Bank will be effectively shielded from capital erosion in the medium term under the agreement, with the bank most likely to have recovered from the fallout of the extended shipping crisis by December 2022.