Realignments of Landesbank Berlin’s and Berlin Hyp’s businesses as part of a reorganisation within Sparkassen Finanzgruppe should have a credit positive impact on the banks’ mortgage cover pools, said Moody’s yesterday (Monday).

The changes will involve Landesbank Berlin (LBB) increasing its focus on its core businesses of regional retail banking, regional commercial real estate (CRE) development and regional corporate banking, noted Moody’s, with Berlin-Hannoversche Hypothekenbank (Berlin Hyp) becoming a central CRE financier within Sparkassen Finanzgruppe, possibly increasing its focus on the nationwide market.

The rating agency said that a new focus on retail banking by Landesbank Berlin would increase the share of residential assets and lower the share of CRE assets in the bank’s mortgage cover pool, which would be credit positive. This impact would outweigh credit negative effects from any increased regional concentration of commercial assets, it added.

“Therefore, on balance, the new strategy will be credit positive for LBB’s mortgage covered bondholders,” said Martin Rast and Martin Lenhard, senior analysts at Moody’s.

Berlin Hyp’s mortgage cover pool could also benefit from the corporate reorganisation if the bank focuses more on the nationwide CRE market outside Berlin and Brandenburg in its new role as central CRE financier, according to the rating agency. Berlin Hyp’s cover pool mostly comprises CRE assets (86%), with a high exposure to Berlin and Brandenburg (28% of the CRE share of the cover pool).

The plans to realign the businesses of LBB and Berlin Hyp are still subject to uncertainties, including ongoing negotiations, noted Moody’s. It said that any portfolio reallocation between the banks as a result of their reorganisations would also affect their respective cover pools, with a credit positive impact only for the programme receiving assets of a higher quality than the ones it transfers.

“While there is currently limited information, we expect the credit impact of any asset transfer to be secondary as compared with the effect of the entities’ new strategic focus,” said Rast and Lenhard.