Oberoesterreichische Landesbank AG

Our stable outlook on Hypo OÖ takes into account the stable outlook on the State of Upper Austria and our expectation that the likelihood of support from the state will remain high over the next two years. The ratings are sensitive to Upper Austria's ability and willingness to support the bank. We would lower the ratings on Hypo OÖ in the event of a downgrade of Upper Austria or if we observed a weakening in Hypo OÖ's role for, or link with, Upper Austria. We could also lower the ratings if the bank embarked on riskier lending, leading our RAC ratio to drop below 10%. A positive rating action would require an upgrade of Upper Austria, accompanied by a sustainable

... AG's (Hypo O+)'s performance to remain sound. We anticipate the bank will uphold its strong capital buffer and good asset quality. We expect only marginal deterioration of its asset quality metrics in 2024, reflecting the bank's exposure--although low--to the stressed business segment of real estate project finance. We expect high private-sector wealth and the banks' prudent lending policy to support Hypo O+'s overall very solid asset quality metrics. At the same time, we continue to see Hypo O+ as more vulnerable to adverse developments than peers with higher income buffers. The bank's S&P Global Ratings-calculated return on equity remained at 6.8% in 2023, at its cyclical high thanks to the favorable interest rate environment. This level is behind the average of Hypo O+'s commercial peers, leaving its management with less room to maneuver in adverse scenarios. However, we acknowledge that relatively low returns reflect Hypo O+'s...

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