Moody’s downgraded the public sector Pfandbriefe of Deutsche Hypo by one notch to Aa2 on Friday, while affirming its mortgage Pfandbriefe at Aa1, following a downgrade of the German issuer’s parent, NordLB. The rating agency has upgraded Raiffeisenbank Czech covered bonds to Aa3.

On 30 June, Moody’s downgraded NordLB and Deutsche Hypo from Baa1 to Baa2 and lowered the banks’ counterparty risk (CR) assessments from Baa1 to Baa2, among other rating actions. The rating agency cited its view that measures taken by NordLB to de-risk and stabilise its capitalisation depend on the development of shipping markets, to which the bank is exposed.

On Friday evening, Moody’s then downgraded Deutsche Hypo’s public sector Pfandbriefe from Aa1 to Aa2. The downgrade reflects that the rating agency does not expect overcollateralisation (OC) in excess of the 2% (on a stressed NPV basis) required by the German Pfandbrief Act, which is consistent with a Aa2 rating.

It meanwhile confirmed the Aa1 rating assigned to Deutsche Hypo’s mortgage Pfandbriefe because it expects that OC will be maintained at a level consistent with a Aa1 rating.

Moody’s downgraded the aircraft Pfandbriefe of NordLB on Wednesday, on the back of the cut to the issuer, and said the mortgage and public sector Pfandbriefe of NordLB remain on review for downgrade.

Also on Friday, Moody’s upgraded the Czech mortgage covered bonds of Raiffeisenbank from A1 to Aa3. The upgrade follows an improvement in the credit quality of Raiffeisenbank, which is not publicly rated by Moody’s. This has resulted in a higher covered bond anchor for the Czech bank’s issuance.

“This covered bond anchor, together with a TPI of “very improbable”, restricts the rating of the mortgage covered bond at Aa2,” Moody’s said. “However, the remaining legal uncertainty regarding whether overcollateralisation (OC) will remain in the cover pool and available for the benefit of covered bondholders after an insolvency of the issuer limits the rating uplift available by OC to an Aa3 rating.”