UniCredit Bank AG

The stable outlook on HVB reflects our view that it will continue to post satisfactory financial results within the next 24 months. Its capitalization will remain strong, despite the deteriorated economic environment. We anticipate UniCredit group to downstream substantial subordinated bail-in-able capacity and expect that business and financial dependencies on affiliates will not increase. We could downgrade HVB under any of the following three scenarios: First, if we were to see HVB as potentially less resilient to parental stress. This could arise, for example, if a deeper franchise or financial integration into the UniCredit group occurs, or if the parent decides to maintain materially smaller-than-expected buffers of capital and subordinated bail-in-able instruments in HVB. We could also downgrade HVB if

...UniCredit Bank AG will continue its strategic path of improving efficiency and raising synergies with UniCredit group as part of its strategy "UniCredit Unlocked". After booking material restructuring provisions in 2021, 2022 already showed significant cost benefits for Germany-based UniCredit Bank AG (better known as HypoVereinsbank; HVB). In an inflationary environment, HVB managed to reduce non-interest expenses by 6%. Based on cyclical tailwinds in revenues, it also improved its cost-to-income ratio to 58%, compared to 67% in the previous year. For 2023, HVB expects to reduce nominal costs again to further approach its strategic target of a cost-to-income ratio of about 50%. Achieving this will require strict cost discipline and additional improvements in revenues. This might prove difficult in a very competitive operating environment, despite the tailwinds from increasing interest margins....

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