Moody’s put HSH Nordbank’s Baa2 rating on review for downgrade yesterday (Wednesday), saying it will assess the future viability of the bank’s business model after disappointing H1 results and a gradual shortening of the bank’s funding maturities.

“The review was triggered by the recently reported H1 2012 results, which showed deterioration in HSH’s operating performance and the reaching of the minimum boundary of the bank’s Core Tier 1 capitalisation of 10%, as required by the European Commission (EC),” said the rating agency. “Furthermore, Moody’s says that the gradual shortening of the bank’s funding maturities in the context of the long duration of most of the bank’s asset base is causing additional downwards ratings pressure.

“In Moody’s view, the current unfavourable market environment implies that these developments introduce a degree of uncertainty as to whether HSH will be able to successfully execute its downsizing plan and restructure its business model by 2014, as stipulated and approved by the EC.”

The bank’s standalone credit assessment was lowered from b1 to b3 within the E+ bank financial strength rating (BSFR) category and the E+ BFSR placed on review for downgrade. Moody’s said it will reassess the level of support factored into the ratings, which now incorporate seven notches of uplift.

“Given HSH’s ownership structure and membership in the public sector’s cross sector support mechanism, a downgrade of the bank’s debt and deposit ratings to below investment grade is unlikely in the context of this review,” said Moody’s.