Research Update: S-Finanzgruppe Hessen-Thueringen Outlook Revised To Stable From Positive On Weaker Capital Forecast; Affirmed At 'A/A-1'

We expect Sparkassen-Finanzgruppe Hessen-Thueringen's (SFHT's) profitability to stay moderate, since interest rates will likely remain low and continue to eat into margins. Moreover, SFHT's high cost base has reduced its ability to build up capital through retained earnings, and loan growth at Landesbank Hessen-Thueringen (Helaba) has picked up. As a result, we now project our risk-adjusted capital (RAC) ratio for SFHT at about 14% over the next 12-24 months and consider it less likely to improve sustainably above 15% over that period. We are therefore revising our outlooks on SFHT's member banks to stable from positive and affirming our 'A/A-1' ratings. The stable outlook indicates that we expect SFHT's group credit profile to remain stable and that the group will

... (SFHT's) profitability to stay moderate, since interest rates will likely remain low and continue to eat into margins. - Moreover, SFHT's high cost base has reduced its ability to build up capital through retained earnings, and loan growth at Landesbank Hessen-Thueringen (Helaba) has picked up. - As a result, we now project our risk-adjusted capital (RAC) ratio for SFHT at about 14% over the next 12-24 months and consider it less likely to improve sustainably above 15% over that period. - We are therefore revising our outlooks on SFHT's member banks to stable from positive and affirming our 'A/A-1' ratings. - The stable outlook indicates that we expect SFHT's group credit profile to remain stable and that the group will remain highly strategic to the German savings banks network....

Research Update