European commercial real estate markets remain under stress, which implies particular asset quality risks to development companies and could mean higher credit losses for Hypo Vorarlberg Bank AG (Hypo Vorarlberg). Hypo Vorarlberg has strong risk-adjusted capital and sound asset quality, but we see a risk of higher nonperforming assets, particularly in its sizeable exposures to the construction and real estate development sector. We therefore revised our outlook on the bank to negative from stable and affirmed our 'A+/A-1' long-term and short-term issuer credit ratings. The negative outlook indicates that we could lower our ratings on Hypo Vorarlberg over the next 12 months if tough real estate markets lead to asset quality deterioration and materially higher credit losses, or if capitalization
