Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.
 
Scope completed the monitoring review for Landeskreditbank Baden-Württemberg – Förderbank – (L-Bank) (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency ratings: S-1+/Stable) on 10 October 2022.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found www.scoperatings.com.

Key rating factors

The AAA rating on L-Bank reflects the explicit, unconditional, unlimited, statutory, direct and irrevocable guarantee of the German Federal State of Baden-Württemberg (AAA/Stable) for L-Bank’s obligations, which is the key factor for equalising L-Bank’s ratings with the ratings of the federal state. As the guarantee is laid down in the relevant laws, it can only be amended, revoked or restricted through a parliamentary act of Baden-Württemberg and would only apply to future transactions entered into with L-Bank after that act is enacted. Scope deems any such development unlikely.

In addition, L-Bank benefits from high strategic importance as a key government-related entity (GRE) implementing economic and social policies for the federal state. Scope also acknowledges the bank’s sound asset quality and high capitalisation, as well as its strong liquidity and funding profile with excellent capital market access. L-Bank’s modest but stable profitability alongside limited loan portfolio diversification are in line with the development bank’s public policy mandate.

The Stable Outlook reflects Scope’s assessment that the risks to the ratings are balanced over the next 12 to 18 months.

The ratings could be downgraded in the event of: i) a downgrade of the federal state of Baden-Württemberg; and/or ii) changes in the legal framework or guarantee structure that notably weaken government support for L-Bank.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Government Related Entities Rating Methodology, 6 May 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Jakob Suwalski, Director

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