Research Update: Hypo Tirol Bank Outlook Revised To Negative On Deepening COVID-19 Risks; 'A/A-1' Ratings Affirmed

Despite governments' measures to contain the COVID-19 pandemic, European economies, including Austria and others to which Hypo Tirol is exposed, face an unprecedented challenge. Under our base case of an economic recovery starting in third-quarter 2020, and into 2021, we expect the bank's earnings, asset quality, and capitalization to be under more pressure than we previously envisaged. Nevertheless, we believe the bank will be able to manage the difficult environment due to its demonstrated sound risk management and solid credit-loss track record, improved diversification, and much reduced Italian legacy exposures. We are revising to negative from stable our outlook on Hypo Tirol. We are affirming our 'A/A-1' long- and short-term issuer credit ratings on the bank. The negative outlook acknowledges

...- Despite governments' measures to contain the COVID-19 pandemic, European economies, including Austria and others to which Hypo Tirol is exposed, face an unprecedented challenge. - Under our base case of an economic recovery starting in third-quarter 2020, and into 2021, we expect the bank's earnings, asset quality, and capitalization to be under more pressure than we previously envisaged. - Nevertheless, we believe the bank will be able to manage the difficult environment due to its demonstrated sound risk management and solid credit-loss track record, improved diversification, and much reduced Italian legacy exposures. - We are revising to negative from stable our outlook on Hypo Tirol. We are affirming our 'A/A-1' long- and short-term issuer credit ratings on the bank. - The negative outlook acknowledges substantial downside risks to our current economic base case, and the consequent possibility that Hypo Tirol's asset quality and risk-adjusted profitability could come under greater...

Research Update