Solid franchise in Germany; Sound market position in Austria and CEE improves geographical diversification; and Restructuring efforts have started to bear fruit. Highly competitive market environment in Germany; Weak domestic asset quality; Modest albeit improving earnings; and Modest capitalization. The ratings on Germany-based Bayerische Hypo- und Vereinsbank AG (HVB) reflect its franchise among private and corporate customers in its core markets of Germany, Austria, and Central and Eastern Europe (CEE), which provides the bank with a sound and diversified funding base and geographical coverage. The ratings also reflect HVB's progress in executing a range of strategic and cost-cutting initiatives and a stronger focus on credit-risk management, which are expected to gradually further improve its profitability levels. Primary negative rating factors
