Fitch Ratings on March 28 took ratings actions on Norddeutsche Landesbank Girozentrale and units Bremer Landesbank Kreditanstalt Oldenburg-Girozentrale and NORD/LB Luxembourg SA Covered Bond Bank after BremerLB estimated a higher-than-expected IFRS pretax loss of roughly €1.4 billion for 2016.
The agency changed the outlook on the long-term issuer default ratings of the three banks to negative from stable, while affirming the ratings at A-. The outlook revision reflects Fitch's view that there could be low likelihood of extraordinary solvency support from NORD/LB's owners if the bank's creditworthiness and the sustainability of its business model deteriorate further over the next one to two years.
The ratings agency also downgraded the viability rating of NORD/LB to "bb" from "bb+" and that of BremerLB to "b+" from "bb" and subsequently withdrew BremerLB's viability rating due to an expected reorganization under its new ownership. NORD/LB took full control of BremerLB in January.
The downgrade reflects the agency's view that the unit's prospects for ongoing unsupported viability have weakened and that NORD/LB's target to return to profitability in 2017 has become less likely given its decreased financial flexibility and the crisis in the shipping market.
At the same time, Fitch affirmed the three banks' short-term issuer default ratings at F1 and their support ratings at 1. Also affirmed were the A-(dcr) derivative counterparty ratings of NORD/LB and BremerLB and their A-/F1 senior debt and deposit ratings. The senior debt rating of NORD/LB Luxembourg SA Covered Bond Bank was affirmed at A-.