Credit Opinion BAWAG P.S.K.

FINANCIAL INSTITUTIONS
CREDIT OPINION
6 July 2016
BAWAG P.S.K.
Update Following Lowering of Macro Profile
Update
Summary Rating Rationale
We assign long- and short-term issuer, debt and deposit ratings of A3/P-2 to Bank fuer
Arbeit und Wirtschaft und Oesterreichische Postsparkasse AG's (BAWAG) and assign a
positive outlook to these ratings. Furthermore, we assign subordinated debt ratings of Baa3
to BAWAG and Counterparty Risk Assessment of A2(cr)/P-1(cr).
RATINGS
BAWAG P.S.K.
Domicile
Vienna, Austria
Long Term Rating
A3
Type
LT Bank Deposits - Fgn
Curr
Outlook
Positive
Please see the ratings section at the end of this report
for more information.The ratings and outlook shown
reflect information as of the publication date.
Contacts
Bernhard Held, CFA
49-69-70730-973
VP – Senior Analyst
bernhard.held@moodys.com
Alexander Hendricks,
49-69-70730-779
CFA
Associate Managing
Director - Banking
alexander.hendricks@moodys.com
BAWAG's A3/P-2 debt and deposit ratings reflect (1) the bank's baa2 baseline credit
assessment (BCA); (2) the result of our Advanced Loss Given Failure (LGF) analysis, which
takes into account the severity of loss faced by the different liability classes in resolution and
which results in two notches of rating uplift to BAWAG's long-term ratings; and (3) a low
likelihood of BAWAG receiving government support, resulting in no additional rating uplift.
BAWAG's baa2 BCA is at the low-end of our scorecard range, indicating potential upside over
our 12-18 month outlook horizon. This reflects our anticipation of a further improvement
in the bank's financial profile, provided that BAWAG (1) carefully manages the expansion
of its international commercial and retail residential portfolios, thereby maintaining its
currently stable risk profile; (2) continues to sustainably build up its capital adequacy ratios
and strike a prudent balance between bondholders' and owners' interests with regard to
dividend payouts; and (3) succeeds in maintaining the achieved profitability levels in 2016
and beyond.
Exhibit 1
Rating Scorecard BAWAG P.S.K. - Key Financial Ratios
Carola Schuler
49-69-70730-766
Managing Director Banking
carola.schuler@moodys.com
Source: Moody's Financial Metrics
MOODY'S INVESTORS SERVICE
FINANCIAL INSTITUTIONS
BAWAG's BCA will nevertheless remain constrained by our assessment of the bank's ongoing expansion into higher-risk asset classes,
largely focusing on international corporate and commercial real estate. In our view, this adds concentration risks to BAWAG's balance
sheet and may exert undue pressure on the bank's profitability and, potentially, capital ratios in a highly adverse macroeconomic
scenario. In addition, the acquisition of a residential mortgage-loan portfolio in the UK in December 2015 adds new risks to BAWAG's
balance sheet, while at the same time promoting further diversification and increasing the level of the bank's earnings streams.
Credit Strengths
»
Capital ratios and core earnings have significantly improved
»
Strong access to stable retail deposits supports funding and liquidity profile
»
Senior creditors benefit from large volumes of granular retail deposits, and cushion provided by additional senior and subordinated
debt instruments in the unlikely event of resolution (LGF analysis)
Credit Challenges
»
Asset-quality risks have decreased and are manageable, yet uncertainties remain around the future performance of BAWAG's
international investment and loan portfolio
»
Less supportive operating environment following downgrade of Austrian Macro Profile
Rating Outlook
»
The outlook on the bank's long-term ratings is positive, reflecting our anticipation of a further improvement in the bank's financial
profile during our outlook horizon. Any improvement would likely affect all ratings.
Factors that Could Lead to an Upgrade
»
Upward pressure on BAWAG P.S.K.'s BCA and thus its long-term ratings could result from (1) continued control and minimization
of risks resulting from BAWAG P.S.K.'s diversification and international expansion strategy that, in an adverse scenario, could
negatively affect asset quality, earnings and capital; (2) higher and high-quality capital buffers over and above the regulatory
minimum as determined by the Basel III capital regime and relevant regulatory authorities, coupled with adequate earnings
retention rates; and (3) sustain the achieved improvement in retained earnings thereby fostering sound internal capital generation
and thus loss-absorption capacity.
»
An upgrade of BAWAG's BCA is likely to trigger an upgrade of the bank's long-term ratings. Upward pressure on the bank's deposit,
issuer and senior unsecured debt ratings could further develop if BAWAG's volume of subordinated debt instruments increases
significantly relative to the bank's tangible banking assets, which could result in one additional notch of rating uplift resulting from
our LGF analysis.
Factors that Could Lead to a Downgrade
»
BAWAG P.S.K.'s BCA and thus its long-term ratings could be downgraded if the bank's financial strength significantly deteriorates
following (1) substantial weakening of the bank's risk profile; and/or (2) BAWAG P.S.K.'s capital ratios falling to levels that are no
longer providing a significant buffer over and above the stricter capital requirements under the Basel III regime and/or as set by its
regulator.
»
A downgrade of the long-term issuer, debt and deposit ratings could further develop if BAWAG's volume of debt instruments
decreases further relative to the bank's tangible banking assets, which could result in fewer notches of rating uplift resulting from
our LGF analysis.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on
www.moodys.com for the most updated credit rating action information and rating history.
2
6 July 2016
BAWAG P.S.K.: Update Following Lowering of Macro Profile
FINANCIAL INSTITUTIONS
MOODY'S INVESTORS SERVICE
Key Indicators
Exhibit 2
BAWAG P.S.K. (Consolidated Financials) [1]
Total Assets (EUR billion)
Total Assets (USD billion)
Tangible Common Equity (EUR billion)
Tangible Common Equity (USD billion)
Problem Loans / Gross Loans (%)
Tangible Common Equity / Risk Weighted Assets (%)
Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%)
Net Interest Margin (%)
PPI / Average RWA (%)
Net Income / Tangible Assets (%)
Cost / Income Ratio (%)
Market Funds / Tangible Banking Assets (%)
Liquid Banking Assets / Tangible Banking Assets (%)
Gross loans / Due to customers (%)
12-152
12-142
12-133
12-123
12-113
Avg.
35.0
38.0
2.6
2.8
2.3
16.1
20.0
2.1
2.8
1.2
49.5
22.1
16.7
115.0
33.9
41.1
2.2
2.6
2.8
12.9
25.2
1.9
2.5
1.0
54.2
22.7
19.5
104.4
35.7
49.2
1.7
2.4
3.5
10.9
36.0
1.5
2.2
0.6
58.5
21.6
27.5
96.9
40.0
52.7
1.5
2.0
4.9
7.2
53.1
1.4
1.5
0.3
63.0
29.3
31.4
104.2
41.1
53.3
1.1
1.5
5.1
4.9
67.4
1.7
1.4
0.3
62.7
34.7
23.7
108.6
-4.04
-8.14
23.34
17.94
3.75
14.56
40.35
1.75
2.66
0.75
57.65
26.15
23.75
105.85
[1] All figures and ratios are adjusted using Moody's standard adjustments [2] Basel III - fully-loaded or transitional phase-in; IFRS [3] Basel II; IFRS [4] Compound Annual Growth Rate based
on IFRS reporting periods [5] IFRS reporting periods have been used for average calculation [6] Basel III - fully-loaded or transitional phase-in & IFRS reporting periods have been used for
average calculation
Source: Moody's Financial Metrics
Detailed Rating Considerations
Asset-quality risks have decreased and are manageable, yet uncertainties remain around the future performance of
BAWAG's international investment and loan portfolio
Any further improvement in BAWAG's asset risk assessment remains dependent on the future performance of BAWAG's international
assets and - more importantly - its success in re-positioning its overall lending portfolio without changing or adding to its risk appetite.
The bank's baa2 Asset Risk score thus reflects both the underlying improvement in the bank's problem loan ratio to 2.3% as of yearend 2015 (€571 million of impaired assets, down from €616 million in 2014) as well as continued uncertainties regarding the expansion
of BAWAG's international corporate and CRE portfolios. Whilst the historic performance of the acquired portfolios has been very solid,
we caution that the aforementioned exposures can trigger large losses in a highly adverse macroeconomic scenario, especially given
that these exposures represent a significant proportion of the bank's Tier 1 capital.
BAWAG displayed total credit and securities exposures of €36.6 billion as of 31 December 2015. The bank has a sizeable corporate
lending and investments book (€14.5 billion, including international CRE and investments) and other high sector concentrations, such
as interbank and the public sector. BAWAG's more granular exposures to the retail sector and small businesses (€14.5 billion) reflect
the bank's acquisitive growth in both Austria (leasing business, mortgage lending and real estate finance) and the United Kingdom
(retail mortgages).
Capital ratios and core earnings have significantly improved
We expect that BAWAG will continuously be able and willing to strengthen its capital adequacy ratios and thus its loss absorption
capacity. However, the pace of this capital build-up is anticipated to slow meaningfully owing to high dividend payouts to the bank's
owners that we expect to continue at a slightly lower payout ratio in coming years. The potential to deliver sustained solid profitability
levels despite pressure from the persistently low interest-rate environment supports this change in the bank's capital retention policy.
With a fully-loaded CET1 ratio of 14.0% as of 31 March 2016 (2015: 13.2%, 2014: 12.1%, 2013: 9.4%), BAWAG holds a further
improved capital cushion. The ratio benefitted from the adoption of the internal ratings-based approach and risk reductions during
2013 and 2014. The quality of capital also improved significantly during 2014, as BAWAG paid back the remaining participation capital
of the Republic of Austria (Aa1 stable1), redeemed outstanding minorities and raised another €125 million in core capital from its
3
6 July 2016
BAWAG P.S.K.: Update Following Lowering of Macro Profile
MOODY'S INVESTORS SERVICE
FINANCIAL INSTITUTIONS
owners. Further, BAWAG fully redeemed its non-Basel III-compliant hybrid capital in June 2015. In our view, the remaining - albeit
considered manageable - tail risk would be a potentially unfavourable court ruling or settlement agreement with the City of Linz
(unrated). Our expectation of lower capital retention to continue in 2016 and potentially beyond and remaining tail risks result in a
negative adjustment to the bank's Capital score to a3.
For 2015, BAWAG reported a strong €418 million net profit, up 25% year-over-year, and largely driven by a 7% increase in net interest
income. Moreover, a 44% year-over-year reduction of risk charges and continued strong cost control supported the result. We expect
that the bank will be able to report annual net income above prior years' average levels over the next one or two years, which is not yet
fully capturing BAWAG's earnings potential in our assigned baa1 Profitability score.
Strong access to stable retail deposits supports funding and liquidity profile
We expect that BAWAG will be able to maintain a balanced liquidity profile. Liquid assets declined during 2015 owing to declining
interbank exposures and we expect a stable development in 2016. Furthermore, BAWAG's liquid assets partly consist of corporate and
peripheral euro-area bonds, largely exposed to highly-rated investment-grade issuers. Our unadjusted baa2 Liquidity Resources score
captures the underlying quality of the liquidity portfolio and also reflects our expectation of a stable liquid banking assets/total tangible
banking assets ratio going forward.
BAWAG's funding profile is sound, despite the bank's policy of favouring variable-rate products. Customer deposits grew by 3%
year-over-year to €21.7 billion or 61% of total assets as of 31 December 2015. The bank's main funding sources are retail and, to a
lesser extent, corporate deposits, which together account for most of its total funding base. The bank also replaced maturing senior
unsecured debt issuances with interbank exposures (largely central bank funding) and covered bonds during 2015 as part of its return
optimisation efforts. The bank's loan-to deposit ratio stood at 114% at year-end 2015 (2014: 103%, 2013: 95%), largely reflecting the
bank's take-over of the UK retail mortgage portfolio in December 2015. We have incorporated these considerations in our unadjusted
baa1 Funding Structure score.
Less supportive operating environment following downgrade of Austrian Macro Profile
On 27 June, we lowered the Macro Profile of Austria to Strong+ from Very Strong-, due to a change in the Banking Country Risk
to Very Strong - from Very Strong. As a result, the weighted Macro Profile of BAWAG also declined to Strong+ from Very Strong-.
BAWAG's Strong+ Macro Profile reflects that close to two thirds of the bank's asset exposures relate to the domestic Austrian market,
with the majority of its non-domestic exposures concentrated on Western European countries with equal or stronger Macro Profiles.
The decline in operating conditions for BAWAG leads to a one notch decline in the assigned asset risk score, however, this change does
not materially reduce the continued upward pressure on the bank's BCA underpinned by continued improvements in the financials
of BAWAG during the first quarter of 2016. These improvements include an increase in the bank's fully-loaded Common Equity Tier 1
ratio to 14.0% from 13.2% as of December 2015, which leads to a notch improvement in the bank's capital score.
Notching Considerations
Loss Given Failure (LGF) Analysis
BAWAG is subject to the Austrian Bank Resolution and Recovery Directive (BaSAG), which we consider an Operational Resolution
Regime. We therefore apply our Advanced LGF analysis, considering the risks faced by the different debt and deposit classes across
the liability structure at failure. We assume residual tangible common equity of 3% and losses post-failure of 8% of tangible banking
assets, a 25% run-off in "junior" wholesale deposits, a 5% run-off in preferred deposits, and assign a 25% probability to deposits being
preferred to senior unsecured debt.
BAWAG's A3 long-term deposit, issuer and senior unsecured debt ratings therefore reflect the likely reduction in expected loss resulting
from the substantial volume of wholesale deposits and senior unsecured debt at failure, leading to a two-notch rating uplift from its
baa2 adjusted BCA.
Our LGF analysis further indicates a high loss-given-failure for subordinated debt classes, leading us to position their assessment one
notch below the adjusted BCA. Absent of government support uplift assigned to this particular debt class, BAWAG's subordinated
bonds are rated Baa3.
4
6 July 2016
BAWAG P.S.K.: Update Following Lowering of Macro Profile
MOODY'S INVESTORS SERVICE
FINANCIAL INSTITUTIONS
Government Support
We assess the probability of government support for BAWAG as low, despite the bank's solid national market shares (in terms of loans
and deposits) as well as the bank's importance to the payment and clearing systems. For Austria, in contrast to other EU countries and
reflective of government measures implemented since 2014, we assign a low level of support for the senior debt and deposit ratings of
its banks. As a consequence, government support does not benefit BAWAG's ratings.
5
6 July 2016
BAWAG P.S.K.: Update Following Lowering of Macro Profile
FINANCIAL INSTITUTIONS
MOODY'S INVESTORS SERVICE
Rating Methodology and Scorecard Factors
Exhibit 3
BAWAG P.S.K.
Macro Factors
Weighted Macro Profile
Strong +
100%
Historic Ratio
Macro
Adjusted Score
Credit Trend
Assigned Score
Key driver #1
Key driver #2
Solvency
Asset Risk
Problem Loans / Gross Loans
2.9%
a2
←→
baa3
Sector
concentration
Litigation risk
Capital
TCE / RWA
16.1%
aa2
←→
a3
Capital retention
Access to
capital
Profitability
Net Income / Tangible Assets
0.9%
baa1
←→
baa1
Return on assets
Financial Profile
Factor
Combined Solvency Score
Liquidity
Funding Structure
Market Funds / Tangible Banking
Assets
Liquid Resources
Liquid Banking Assets / Tangible
Banking Assets
Combined Liquidity Score
Financial Profile
Business Diversification
Opacity and Complexity
Corporate Behavior
Total Qualitative Adjustments
Sovereign or Affiliate constraint:
Scorecard Calculated BCA range
Assigned BCA
Affiliate Support notching
Adjusted BCA
Instrument Class
Counterparty Risk Assessment
Deposits
Senior unsecured bank debt
Dated subordinated bank debt
a1
baa1
22.1%
baa1
←→
baa1
Extent of market
funding reliance
16.7%
baa2
←→
baa2
Stock of
liquid assets
baa1
Loss Given
Failure
notching
3
2
2
-1
Additional notching
0
0
0
0
baa1
baa1
0
0
0
0
Aa1
a3-baa2
baa2
0
baa2
Preliminary
Rating
Assessment
a2 (cr)
a3
a3
baa3
Government
Support notching
Local Currency
rating
0
0
0
0
A2 (cr)
A3
A3
Baa3
Foreign
Currency
rating
-A3
A3
--
Source: Moody's Financial Metrics
6
6 July 2016
BAWAG P.S.K.: Update Following Lowering of Macro Profile
FINANCIAL INSTITUTIONS
MOODY'S INVESTORS SERVICE
Ratings
Exhibit 4
Category
BAWAG P.S.K.
Outlook
Bank Deposits
Baseline Credit Assessment
Adjusted Baseline Credit Assessment
Counterparty Risk Assessment
Issuer Rating
Senior Unsecured
Subordinate -Dom Curr
ST Issuer Rating
Moody's Rating
Positive
A3/P-2
baa2
baa2
A2(cr)/P-1(cr)
A3
A3
Baa3
P-2
Source: Moody's Investors Service
Profile
BAWAG P.S.K is a universal bank domiciled in Austria. It offers a range of retail and corporate banking products, including deposittaking, loans and investment services. Moreover, it provides international business products, such as commercial real-estate financing,
capital market solutions as well as securities and asset management services. While the bank operates primarily in Austria, it also
has a presence in core Western European markets. In October 2014, it opened a branch office in London to support its international
operations.
The bank holds total assets of €35.5 billion as of 31 December 2015 and serves approximately 1.6 million customers through a
nationwide network of about 480 branches which are operated in cooperation with Oesterreichische Post AG (Austrian Post, unrated).
BAWAG holds a 5.6% market share in terms of key deposit products in Austria as of 31 December 2015.
As of 31 December 2015, the bank's major shareholders were Cerberus Capital Management L.P. (Cerberus, approximately 52% stake)
and GoldenTree Asset Management L.P. (GoldenTree, approximately 40%).
About Moody's Bank Scorecard
Our Scorecard is designed to capture, express and explain in summary form our Rating Committee's judgment. When read in
conjunction with our research, a fulsome presentation of our judgment is expressed. As a result, the output of our Scorecard
may materially differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strong
divergence). The Scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down to
reflect conditions specific to each rated entity.
Endnotes
1 The rating shown is Austria's senior unsecured rating and outlook
7
6 July 2016
BAWAG P.S.K.: Update Following Lowering of Macro Profile
MOODY'S INVESTORS SERVICE
FINANCIAL INSTITUTIONS
© 2016 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES ("MIS") ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT
RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S
PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE
SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY
ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET
VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL
FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED
BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT
RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT
RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS
AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND
EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR
RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT
YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,
AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED
OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY
PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well
as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it
uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,
MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody's Publications.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any
indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any
such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or
damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a
particular credit rating assigned by MOODY'S.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory
losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the
avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents,
representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH
RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including
corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any rating,
agreed to pay to Moody's Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain
policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and
rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at
www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors
Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended
to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you
represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or
indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as
to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless
and inappropriate for retail investors to use MOODY'S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other
professional adviser.
Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's
Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally
Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an
entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered
with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred
stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees
ranging from JPY200,000 to approximately JPY350,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
REPORT NUMBER 1032663
8
6 July 2016
BAWAG P.S.K.: Update Following Lowering of Macro Profile
FINANCIAL INSTITUTIONS
MOODY'S INVESTORS SERVICE
Contacts
Bernhard Held, CFA
VP – Senior Analyst
bernhard.held@moodys.com
Camilla P Tenn
Copy Editor
9
6 July 2016
CLIENT SERVICES
49-69-70730-973
Torsten-Alexander
Thebes
Associate Analyst
Americas
1-212-553-1653
Asia Pacific
852-3551-3077
Japan
81-3-5408-4100
EMEA
44-20-7772-5454
BAWAG P.S.K.: Update Following Lowering of Macro Profile