Moody’s downgraded euro benchmark covered bond issuers Raiffeisen-Landesbank Steiermark and Raiffeisenlandesbank Niederoesterreich-Wien (RLB NOe-Wien) from A1 to A2 on Friday while taking rating action on members of Austria’s Raiffeisen Bankengruppe (RBG).

RLB Steiermark building

Alongside Raiffeisenlandesbank Oberoesterreich, RLB NOe-Wien was cut from A1 to A2 and left on negative outlook. Raiffeisen-Landesbank Steiermark was lowered from A1 to A2, on stable outlook, as were Raiffeisenverband Salzburg and Raiffeisenlandesbank Vorarlberg. The A2 and A3 ratings of Raiffeisen Bank International (RBI) and Raiffeisen Zentralbank Oesterreich (RZB), respectively, had their outlooks changed from stable to negative.

“Today’s rating actions are driven by Moody’s assessment of the Raiffeisen sector’s moderate capitalisation, as well as its overall limited loss-absorption capacity relative to its risk profile,” said the rating agency. “Its credit profile is skewed towards and therefore strongly correlated with its higher-risk Central and Eastern European (CEE) operations housed at Raiffeisen Bank International AG.

“As a result, the sector’s capacity to extend capital support to all of its group members is constrained in an adverse scenario. The rating actions also capture Moody’s view that RBG’s capital strengthening is progressing at a slower pace than for many of its peers and slower than Moody’s had anticipated.”