Raiffeisenlandesbank Niederoesterreich-Wien (RLB NOe-Wien) was put on review for downgrade from A1 by Moody’s today (Friday), but the rating said it is unlikely the cut will be more than one notch.

The Austrian bank’s rating was put on review alongside its standalone credit assessment, of Baa2.

Weak capital generation and earning volatility make the bank “increasingly vulnerable to elevated risks in the current economic downturn”, said Moody’s. Moody’s highlighted RLB NOe-Wien’s negative performance in the first half of 2012.

The bank’s moderate capitalisation level, reported at 9.1% in the first half of 2012, and investment portfolio composition were also mentioned as elements making the bank vulnerable to challenges arising from the Austrian domestic market and from further declines in the European one.

Moody’s also cited external factors, such as a low yield environment and costs related to upcoming regulatory changes, as putting pressure on the bank’s rating.

However, Moody’s noted that RLB NOe-Wien can benefit from a strong domestic franchise, only moderately relies on wholesale funding, and enjoys a high probability of support resulting from its position in the co-operative banking sector. For these reasons, the rating agency said that the bank’s long term rating is unlikely to be downgraded by more than one notch.