The ratings on Germany-based BHW Bausparkasse (BHW B) are based on its sound asset quality, stable funding, and adequate capital. This is offset by low and largely interest-rate-sensitive profitability, group management's unconvincing track record, particularly in interest rate management and in solving problems at its ailing subsidiary Allgemeine Hypothekenbank Rheinboden AG (AHBR), and the strain on the group's resources from support for AHBR. BHW B is the principal subsidiary of BHW Holding AG (not rated), the parent of the BHW group, which predominantly provides building savings (Bauspar) and mortgage finance services. Asset quality benefits from the high granularity and collateralized nature of the bank's residential homeowner loan portfolio, which should remain fairly stable despite some downward pressure. Funding and liquidity
