Strategic importance to UniCredito Italiano SpA (A+/Negative/A-1); Domestic franchise, mainly in Bavaria; and Restructuring expected to 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) are based on its strategically important status within the Unicredito group. They also reflect HVB's franchise among private and corporate customers, particularly in Bavaria and to lesser extent in Northern Germany, and Standard&Poor's Ratings Services expectation that the strengthening of loan-loss reserves (LLRs) and restructuring measures, which have reduced HVB's capitalization to very low levels, will be largely offset by improved future earnings retention to
