The ratings on Germany-based Bayerische Hypo- und Vereinsbank AG (HVB) are based on its strategically important status within the Italy-based Unicredito group. They also reflect HVB's franchise, particularly in Bavaria and to lesser extent in Northern Germany, among private and corporate customers, and Standard&Poor's Ratings Services expectation that the strengthening of loan-loss reserves (LLRs) and restructuring measures, which have reduced HVB's capitalization to very low levels, will be largely offset by improved future earnings retention to restore its capital base. Primary negative rating factors are HVB's weak domestic mortgage loan book, its weak capitalization, and the still weak performance of HVB's domestic retail business. These factors need to be viewed in light of a still difficult economic and
