The ratings on Bayerische Hypo- und Vereinsbank AG (HVB) are based on the group's market position and sizable customer base in Germany, Austria, and neighboring eastern European countries; its stable and diversified funding sources; its financial flexibility; and its overall satisfactory asset quality. These factors are partly offset by modest profitability and capital levels, and still limited diversification of revenues. The ratings also reflect Standard&Poor's expectations that the integration of Bank Austria AG (BA; A/Stable/A-1) will continue as planned and that existing problems in HVB's and BA's loan portfolios have been adequately provisioned. HVB's provisioning needs continued to compare unfavorably with its peers in 2001. Furthermore, HVB's comparatively high exposures to real estate markets and the corporate sector
