Austria's real estate market remains under stress, which implies persisting asset quality risks for development companies, which could lead to higher-than-expected credit losses for Hypo Vorarlberg Bank AG (Hypo Vorarlberg). The bank's risk-adjusted capital (RAC) remains strong, but we see a risk of higher nonperforming assets in the next 12 months, due to its sizable exposures to the construction and real estate development sector. We therefore affirmed our 'A+/A-1'long-term and short-term issuer credit ratings on the bank and maintained our negative outlook. The negative outlook reflects our view of ongoing downside risks over the next 12 months if stressed real estate markets lead to a material asset quality deterioration, resulting in materially weaker capitalization, or if Hypo Vorarlberg's profitability and
