Rating Action: Moody’s affirms Raiffeisen Bank International’s ratings and maintains a stable outlookGlobal Credit Research – 04 Mar 2022Baseline Credit Assessment downgraded to baa3 from baa2Frankfurt am Main, March 04, 2022 — Moody’s Investors Service (Moody’s) has today affirmed the ratings of Raiffeisen Bank International AG (RBI), including the bank’s A2 long-term deposit, senior unsecured and Counterparty Risk Ratings (CRR), the Baa2 subordinate debt ratings and the Ba2(hyb) ratings on RBI’s non-cumulative preference shares. At the same time, Moody’s downgraded RBI’s Baseline Credit Assessment (BCA) to baa3 from baa2 and affirmed the bank’s baa2 Adjusted BCA and P-1 short-term deposit ratings and CRRs. The outlook on RBI’s long-term senior unsecured debt and deposit ratings remains stable.Through its subsidiaries in Russia (B3 ratings under review) and Ukraine (B3 ratings under review), RBI is highly exposed to the downside credit risks provoked by the military invasion of Ukraine by Russia and today’s rating actions were prompted by the adverse developments in the region.The downgrade of RBI’s BCA reflects that the bank’s financial profile will weaken as a result of the economic impact of the conflict. In particular, the severe sanctions that Western countries have imposed on Russia and the economic disruption that Russia’s military invasion causes in Ukraine will hit RBI’s profitability. At the same time, Moody’s considers the increased risks for creditors to be substantially mitigated because of RBI’s status as the central institution of the Austrian Raiffeisen Banking Group (RGB) and it being a member bank in RBG’s institutional protection scheme (IPS), which ensures financial support for RBI, in case of need. Consequently, Moody’s affirmed RBI’s baa2 Adjusted BCA and ratings while maintaining a stable outlook.Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL463618 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.RATINGS RATIONALEDOWNGRADE OF RBI’S BCA REFLECTS PRESSURE ON RUSSIAN AND UKRAINIAN OPERATIONSMoody’s expects RBI’s operations in Russia and Ukraine to be challenged by the consequences of the military conflict caused by Russia’s invasion of Ukraine and international sanctions imposed on Russia’s economy and financial system. Its Russian and Ukrainian businesses have strengthened RBI’s profitability in recent years, based in particular on strong contributions from RBI’s large Russian operations.The downgrade of RBI’s BCA reflects Moody’s expectation that RBI’s profitability will be materially and more permanently reduced as a result of its Eastern European operations being negatively impacted by military conflict and sanctions. The downgrade also reflects the downside risks the conflict may pose to RBI’s asset quality and capitalization and considered mitigants put in place by RBI, including the bank’s temporary full retention of its 2021 profit and a ruble currency hedge held directly by RBI to shield its regulatory Common Equity Tier 1 ratio against ruble devaluation. In addition, RBI benefits from a solid funding and liquidity profile. The bank has access to sector funds and pools liquidity on behalf of RBG’s member banks. At the same time, its Eastern European subsidiaries are self-funded and do not require cross-border funding from RBI. This limits RBI’s financial risk to its capital investment in its subsidiaries.AFFIRMATION OF RBI’S ADJUSTED BCA AND RATINGS REFLECTS BROADER SHOCK-ABSORPTION CAPACITY OF THE SECTORThe affirmation of RBI’s baa2 Adjusted BCA reflects the very high likelihood that RBI would receive support from RBG in case of need. RBI is a member of the federal IPS of RBG which is designed to provide liquidity and capital support for its members, in addition to its role as a deposit guarantee scheme. Moody’s believes stronger sector cohesion and more directly available liquid resources within RBG following the simplification and extension of the sector’s IPS last year have resulted in a very reliable support framework.In addition, Moody’s considers RBG’s financial resilience has meaningfully strengthened in recent years as a result of the improving solvency profiles of its member banks. RBG’s domestically focused local retail bank members and regional Raiffeisenlandesbanks account for more than half of the sector’s total assets, which materially dilutes the weight of RBI’s Eastern European activities within the group. Whereas the downside risks to RBI’s Eastern European operations negatively affect the risk profile of RBG, Moody’s expects the sector’s solvency to remain resilient and solid, consistent with the affirmation of RBI’s baa2 Adjusted BCA, which now incorporates one notch of rating uplift from RBG.Furthermore, the affirmation of RBI’s deposit and senior unsecured debt ratings reflects only smaller changes to the bank’s liability structure, resulting in unchanged ratings uplift from Moody’s Advanced Loss Given Failure (LGF) analysis for individual instrument classes and the rating agency’s assessment of a low probability for the bank receiving government support.Moody’s affirmed RBI’s non-cumulative preference shares (low-trigger AT1 instruments) at Ba2(hyb) on the basis of the affirmation of the bank’s baa2 Adjusted BCA. Moody’s positions these instruments’ ratings three notches below the Adjusted BCA to reflect the high loss severity and risk of coupon suspension and write-down prior to bank failure, in line with its usual approach for AT1 instruments. The Ba2(hyb) rating also reflects Moody’s view that RBI’s management will be able to stick to its stated intention of avoiding AT1 coupon suspensions based on RBI’s own financial strength which leaves significant buffers to quantitative coupon suspension thresholds as well as on the availability of sector support in case of an unexpectedly strong decline of core capital ratios.STABLE OUTLOOKThe outlook on the long-term deposit and senior unsecured debt ratings of RBI remains stable. It reflects Moody’s expectation that RBI’s baa3 BCA captures downside risks to the bank’s financial profile and that a moderate weakening in RBG’s financial strength will not materially reduce its capacity to provide support, and hence rating uplift to RBI.The stable outlook further reflects Moody’s expectation that RBI’s liability structure will remain broadly unchanged, yielding unchanged LGF notching uplift over the outlook horizon.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSAn upgrade of RBI’s long-term ratings is currently unlikely, but could nevertheless happen in case of a significant strengthening of RBG’s solvency. RBI’s subordinate debt and lower-ranking liabilities could also be upgraded following a significant increase in the stock of equal- or lower-ranking liabilities, such that it reduces the expected loss for these instrument classes.RBI’s BCA could be upgraded if the bank increases its combined solvency such that it matches at least the level achieved in 2021 on a sustained basis.RBI’s ratings could be downgraded in case of a more material weakening of RBG’s financial profile or in case of a decrease in RBI’s bail-in-able debt buffer, leading to fewer notches of rating uplift under Moody’s Advanced LGF analysis.RBI’s BCA could be downgraded in case of additional and significant weakening of its solvency beyond Moody’s current expectations, in particular if accopanied by a weakening of the bank’s funding and liquidity.PRINCIPAL METHODOLOGYThe principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESThe List of Affected Credit Ratings announced here are a mix of solicited and unsolicited credit ratings. For additional information, please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com. Additionally, the List of Affected Credit Ratings includes additional disclosures that vary with regard to some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL463618 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody’s disclosures on the following items: ** EU Endorsement Status ** UK Endorsement Status ** Rating Solicitation ** Issuer Participation ** Participation: Access to Management** Participation: Access to Internal Documents** Lead Analyst** Releasing OfficeFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. 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