Oberoesterreichische Landesbank AG

However, results for the first six months of 2022 indicate the full-year 2022 results are likely to be at a slightly lower level than in 2021. While management has a strong focus on improving efficiency, we do not expect tangible improvements in the medium term. This is because the competitive market environment and increased need for investments into digitalization pose challenges to revenue and cost targets, until the investments start to pay off. Positively, we understand the bank is not under pressure from shareholders to generate high returns. Its strong capital buffer can facilitate moderate lending growth, which leaves management sufficient room to invest in the bank's modernization and digitalization. Our stable outlook on Hypo OÖ takes into account the

... AG (Hypo O+)'s performance will remain sound, despite the worsened economic environment. We anticipate the bank will work to decrease its profitability gap with peers, while upholding its strong capital buffer and good asset quality. We expect only marginal deterioration of asset quality metrics, reflecting the material fiscal support to the private sector in Austria from the state, high private-sector wealth, resilience in previous downturns, and the banks' prudent lending policies. This will keep risk costs low while the cost of living increases with inflation and the debt repayment burden increases with higher interest rates. At the same time, we think Hypo O+ continues to face downside risks in light of its low profitability and weak operating efficiency, which leave the bank more vulnerable to adverse developments than peers with higher income buffers. The bank's S&P Global Ratings-calculated return on equity improved to 5.7%...

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