Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or minimum every six months in the case of sovereign, sub-sovereign 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 ratings 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 issuer ratings: S-1+/Stable) on 22 April 2024.

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 ratings history can be found on www.scoperatings.com.

Key rating factors

The AAA rating of L-Bank is equalised with the AAA/Stable rating of the German Federal State of Baden-Württemberg (Baden-Württemberg), given the state’s explicit, unconditional, unlimited, statutory, direct, and irrevocable guarantee for L-Bank’s obligations.

This is further underpinned by i) a mature and very supportive legal set-up, which makes changes to L-Bank’s business model or guarantee structure unlikely; ii) the bank’s high strategic importance to the Federal State as a key government-related entity implementing economic and social policies with a countercyclical role, supported by the stability of its resources; iii) high capitalisation and asset quality, and iv) a strong liquidity and funding profile with strong capital market access.

Challenges are L-Bank’s modest but stable profitability and undiversified earnings, both foreseen by the bank’s public policy mandate.

The Stable Outlook reflects Scope’s assessment that the risks L-Bank faces are balanced.

The ratings/Outlooks could be downgraded if: i) the Federal State of Baden-Württemberg’s ratings/Outlooks were downgraded; and/or ii) changes occurred to L-Bank’s legal framework or guarantee structure, notably weakening government support.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Government Related Entities Rating Methodology, 13 July 2023) 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 Julian Zimmermann, Associate Director

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