Solid franchise in Germany, mainly in Bavaria; Sound market position in Austria and CEE improves geographical diversification; Steadily improving financial profile of Bank Austria; and Restructuring should lead to improved earnings in 2005 and beyond. Still difficult operating environment in Germany; Weak domestic mortgage loan book; Weak capitalization; and Modest albeit improving core earnings. 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. It also reflects Standard&Poor's expectation that the strengthening of loan-loss reserves (LLRs) and restructuring measures, which have reduced HVB's
