Swedbank AB Issuer Rating Report

Transcription

1 11 June 2018 Financial Institutions Swedbank AB Swedbank AB A+ STABLE Overview Scope Ratings has assigned an Issuer Rating of A+ to Swedbank AB, with a Stable Outlook. The short-term rating is S-1+, with a Stable Outlook. The Issuer Rating was upgraded by one notch on 24 th May The upgrade is based on Swedbank s ability to weather weakness in Sweden s housing market, reassuring financial metrics and steady growth strategy based on cost discipline and a strong digital offering. The ratings were not solicited by the issuer. Both ratings and analysis are based solely on publicly available information. The issuer is not participating in the process. The ratings are not applicable to unguaranteed subsidiaries of the rated parent. Highlights Swedbank s ratings reflect the bank s strong and low-risk franchise in Sweden, enjoying a low level of both impaired loans and credit impairment charges. Swedbank is Sweden s largest mortgage lender, with a 23% market share, and one of the country s leading banks. It is also the market leader in the Baltic states. It has a very strong capital position and minimal problem assets, as well as a high level of profitability, supported by strong cost efficiency. The long-term ratings also reflect a degree of caution about Swedbank s reliance on the real estate sector in Sweden for revenue and balance-sheet growth. Ratings & Outlook Issuer Rating A+ Outlook Senior unsecured debt rating Additional Tier 1 rating Short term debt rating Stable A BB+ S-1+ Short term debt rating outlook Stable Lead Analyst Jennifer Ray j.ray@scoperatings.com Associate Hannes Merlecker h.merlecker@scoperatings.com Team Leader Sam Theodore s.theodore@scoperatings.com Like other Swedish banks, Swedbank depends on wholesale markets and corporate deposits for a considerable proportion of its funding. This is mitigated by access to the stable and well-tested covered bond market in Sweden, accounting for nearly one third of Swedbank s funding. Rating drivers (summary) The rating drivers, in decreasing order of importance in the rating assignment, are: Leading retail bank and mortgage lender in Sweden and the Baltic countries Strong profitability, asset quality and capital adequacy, although to some extent supported by cyclical factors Concentrated exposure to Swedish property is the key asset risk, although we do not see a hard landing for the housing market as the most likely scenario, and view Swedbank as well positioned to deal with a normalisation of the credit cycle Significant reliance on wholesale market funding, although deposit growth has helped to reduce this since the financial crisis, and a significant proportion consists of covered bonds, a well-tested and stable funding source Scope Ratings GmbH Suite Angel Square London EC1V 1NY Phone Headquarters Lennéstraße Berlin Phone Fax info@scoperatings.com Bloomberg: SCOP 11 June /12

2 Rating change drivers Broader slowdown or shock to the Swedish macro environment. Given the recent strength of the Swedish economy in the context of a benign credit cycle and negative interest rates, an economic slowdown or a sudden sharp hike in interest rates (most likely due to some form of external economic shock) could prove testing both in terms of asset quality and profitability. The effect could be exacerbated by high levels of household debt and recent strong credit growth. A material decline in Swedish real estate prices leading to sustained deterioration in asset quality. Swedbank is experiencing extremely low levels of credit impairments (8bps in 2017), which may not prove fully sustainable. Swedbank s largest sector exposure is to private mortgages, followed by loans to property management companies. We would expect household mortgages to perform better than other property-related loans in most scenarios. At this time there is no visible impact on asset quality from the fall in Swedish house prices since autumn 2017, and we don t consider a hard landing as the most likely outcome. Swedbank s focus on efficiency (FY17 cost/income ratio: 42%) may help cushion against a mild asset quality deterioration, as has been evident in the bank s (relatively limited) oil-related exposures during 2016 and Maintaining or improving already sound prudential and financial fundamentals, especially if the economy deteriorates more than expected. A normalization of the domestic credit cycle could pose some challenges. We believe the bank is well positioned to deal with this, primarily by absorbing higher losses through current strong earnings while maintaining a strong and liquid balance sheet. Demonstrating this would further confirm our view that the bank is focused on maintaining its solid financial profile. 11 June /12

3 Rating drivers (details) Leading mortgage and retail bank in Sweden and the Baltic countries Created through the 1997 merger of Sparbanken Sverige and Foreningsbanken, respectively rooted in the savings bank and agricultural bank sectors, Swedbank is one of Sweden s largest banks. It has leading market shares in mortgages (through Swedbank Hypotek), private customer deposits, savings funds (via the subsidiary Robur) and bank giro payments. Swedbank also lends to domestic SMEs 1. Through a network of 218 branches in Sweden as of YE17 (YE16: 248), plus its internet and telephone banks, Swedbank serves 4.1 million private customers and 270,000 corporate customers. It also distributes products through the networks of Sweden s independent savings banks, which, together with partly-owned banks, account for about 30% of the Group s domestic sales. Swedbank in return provides central clearing and IT support to the savings banks. In % of Swedbank s net profit was earned in Sweden. Swedbank is also a leader in the Baltic countries, especially in Estonia. At YE17 the combined private customer base across the Baltic countries was 3.3 million, with 287,000 corporate customers, served via 133 branches. Figure 1: Selected Market shares in Sweden and the Baltics (4Q17) Sweden Estonia Latvia Lithuania Loans 23% 46% 31% 34% Mortgage Loans 24% 46% 34% 33% Private Deposits 21% 55% 32% 40% Corporate Loans 17% 37% 17% 18% Corporate Deposits 20% 43% 15% 23% Payments 36% 59% 50% 49% Funds 21% 42% 42% 37% Source: Company Reports International diversification has not always been a positive for Swedbank, given the economic impact of the financial crisis in the Baltics, Russia and Ukraine. Swedbank has successfully reduced risk in the Baltics in recent years and has exited its operations in Ukraine and Russia, to focus on its home markets. Scope s expectation is that Swedbank will largely continue to focus on its domestic banking business in Sweden, and building on its strong market position in the Baltic countries. Swedish Banking accounted for 59% of 2017 revenues. Baltic Banking accounted for 17%, with 18% coming from the Large Corporates and Institutions division (see Figure 2). As well as in Sweden, the latter operates in Norway, Finland, the US and China. With loans accounting for 71% of its balance sheet, asset quality is the main business risk, and Swedbank s chief credit exposures relate to real estate. Of SEK 1.57tn in total loans at YE17, 55% were private mortgages, with a further 22% made to property management companies and housing co-operatives. Direct construction lending is minimal (1%). No other sector accounts for more than 10% of the loan book (see Figure 3). 1 Corporate clients with turnover of less than SEK 2bn 11 June /12

4 Figure 2: Revenues split by division (2017) Figure 3: Loan book composition (4Q17) 17% 19% 5% 59% Swedish Banking Large Corporates and Institutions Baltic Banking Group Functions and other 1% 3% 7% 19% 15% 55% Private Mortgages Property Management Housing Cooperatives Construction Other Private Other Corporate Source: Company data, Scope Ratings Source: Company data, Scope Ratings Strong profitability, asset quality and capital adequacy, although supported to some extent by cyclical factors Swedbank s current profitability and asset quality metrics remain very strong. The earnings profile gives the bank ample buffers to absorb potential losses going forward. In 2017, the bank recorded a net attributable profit of SEK 19.4bn (FY16: SEK 19.4bn), with ROAE of 15.1% (FY16: 15.8%), supported by a one of Europe s strongest cost/income ratios -- 39% in FY17 (FY16: 38%) and negligible credit losses. Cost efficiency is considered a cornerstone of Swedbank s strategy. In the near-term efficiency will be somewhat negatively affected by continued investment in digitalization projects, notably in 2018 for mortgages. However, Swedbank s digitalization strategy is already well advanced, and the underlying level of efficiency is supportive of the bank s need to spend upfront on technology, which in turn enhances Swedbank s ability to segment and target customers and control costs. Swedbank s asset quality was negatively affected by the severe economic downturn in the Baltic countries and Ukraine following the financial crisis. As a result, credit impairments have shown some volatility in recent years, peaking in 2009, and turning negative in 2011 and 2012, driven by provision reversals, as shown in Figure 4. In 2013 Swedbank exited its retail operations in Ukraine and Russia to focus its international efforts in the Baltic countries. The present benign economic environment has helped to keep credit losses remarkably low. In 2017 the cost of risk (loan loss provisions vs. average gross loans) were a minimal 0.10%, compared to an even lower 0.09% in FY16. The domestic and Baltic businesses saw again net recoveries in FY17 while the Swedish Banking loan impairments increased owing to loan provisions for individual commitments. Overall loan impairments declined to SEK 1.29bn (FY16: 1.37bn) due to lower provisions within the Large Corporations & Institutions segment. Those provisions made mostly related to the oil sector, which remains under pressure. Oil exposures amount to less than 1% of Swedbank s gross loans. 11 June /12

5 Figure 4: Swedbank NPLs and cost of risk, , (%) NPL ratio as reported Swedish Banking Sector NPLS Cost of Risk (%) 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% % 1.5% 1.0% 0.5% 0.0% -0.5% Source: Company data, IMF, Scope Ratings Swedish banks headline capital ratios appear notably high versus international peers, but asset risk intensity and leverage ratios are lower. Swedbank s asset risk intensity (RWAs as a percentage of total assets) was 18.5% at YE17, compared to 23.6% for its Nordic peers and 31.2% for international peers. In large part this is the result of concentration on residential mortgage lending, which attracts comparatively low risk weights (albeit targeted by regulators with additional capital requirements through Pillar 2). As for all international banks, Swedish banks will become subject to the 72.5 % capital input floor agreed by the BIS, limiting the differences between risk weights used under internal models and those imposed under the standardized approach. In the near term we expect the negative impact on the banks capital ratios will be limited, as the measure will not be fully implemented until Ultimately although average risk weights are likely to rise, we also expect the related Pillar 2 capital requirements to be dropped as a result. A much larger technical impact is due to arise from the FSA s proposed changes to Swedish banks capital calculations (expected to kick in at 31 st December 2018). Effective risk weights on Swedish mortgages will rise and be set via Pillar 1 rather than Pillar 2. This will reduce banks reported capital ratios and overall capital requirements expressed as a percentage of RWAs. It will also increase asset risk intensity closer to that of international peers. The regulator expects the real effect on capital to be minimal, in that the nominal amount of equity held should remain stable. Concentrated exposure to Swedish property is the key asset risk, although we do not see a hard landing for the housing market as the most likely scenario, and view Swedbank as well positioned to deal with a normalisation of the credit cycle A long period of low default rates coupled with inexpensive covered bond funding has supported an expansion in mortgage credit, which so far has proved very profitable for the banks, with low credit losses. Concentrated domestic real estate exposure is Swedbank s largest single asset risk. A bull market lasting more than two decades until the autumn of 2017 saw house prices rise much faster than inflation, more than doubling since 2005, according to the Riksbank s latest Financial Stability Report, 2. This is much faster than seen in the EU as a whole and was largely uninterrupted by the financial crisis. Several structural factors (including an imbalance between supply of and demand for housing, strong income growth and continued low interest rates) help to explain the long bull market. 2 Published 23 rd May June /12

6 The Swedish Finansinspektionen (FSA), the Riksbank and the European Commission have all expressed caution about excessive credit growth and levels of household debt in Sweden. The average debt to income ratio for Swedish households with a mortgage stood at 343% in 2016, compared to 324% in This had fallen to 338% in September However, for 31% of households the ratio was in excess of 400%, and for 13% it topped 600%. The FSA has implemented some macro-prudential measures designed to put a brake on excess lending growth in the household sector. As highlighted by the recent gradual reduction in debt to income ratios, the measures have had some impact. They include a mortgage cap limiting the LTV ratio on new loans to 85% from 2010 onwards and raising the risk weight on Swedish mortgages to 25%, applied through a Pillar 2 requirement. Given the traditional Swedish reliance on maintaining long-maturity mortgages, in June 2016 the FSA also introduced an amortisation requirement, forcing households with a mortgage LTV ratio between 50% and 70% to amortise at least 1% of the mortgage s original value every year, rising to 2% for an LTV ratio over 70%. A further amortization requirement became effective in March 2018, for new mortgage loans with a value exceeding 4.5x household gross income. These will be amortised 1% faster than would otherwise have been the case. Thus, where the income cap is exceeded, loans with an LTV below 50% will amortise at least 1% annually, with the percentage rising to 2% for mortgages with LTVs between 50% and 70%, and to 3% for mortgages with LTVs in excess of 70%. Although we do not see it as the most likely scenario, with the Riksbank predicting stabilization in house prices in 2018, we caution that a serious correction in the real estate market hurting households wealth levels, or an economic shock leading to a faster-than-expected rise in mortgage interest rates and hitting debt affordability, could hurt Swedbank s asset quality and profitability. 4 Most Swedish mortgages are variablerate, so households are sensitive to rate rises, particularly those that are most indebted. House prices began falling in September The downturn appears related to the residential construction boom driving increased supply of new homes, and so far, appears manageable. Borrowers ability to service debt has remained resilient, and the cost of risk over recent periods has been remarkably low. Our base case scenario is that interest rates will rise gradually, helping to protect debt service affordability. As shown in Figure 5, Swedbank s property-related lending has expanded faster in recent years than other types of lending, and made up 77% of total loans to the public at YE17. However, Swedbank s growth in property lending has not been faster than that of the sector as a whole. 3 Source: Sveriges Riksbank 4 Our report Swedish Banks and the Property Market provides detailed stress test scenarios for Swedbank 11 June /12

7 Figure 5: Swedbank - loan book evolution , by sector (SEK bn) 1600 Private Mortgages Property Management Housing Cooperatives Construction Other Private Other Corporate Source: Company data, Scope Ratings As an asset class we would expect residential mortgage loans to perform well in most scenarios. Swedbank stress tests household borrowers against a 7% interest rate assumption, versus much lower current real rates. Other forms of real estate lending, mostly to property management companies, could prove riskier in a downturn, although Swedbank has exercised caution towards more leveraged companies and focuses on cash flow analysis for these borrowers. Overall, we view Swedbank as well positioned to deal with normalisation of the credit cycle, supported by its strong earnings capacity. We further note that a significant collateral cushion exists in that Swedbank s average LTV ratio for its Swedish mortgage portfolio stood at 54% as of 4Q17, and 68% for new mortgages. Of the total portfolio 99% of loans have LTVs less than 75%. Significant reliance on wholesale market funding, although a significant proportion consists of covered bonds, a well-tested and stable funding source As of YE17 Swedbank had SEK 2.12tn in total assets (YE16: SEK 2.15tn). These were funded by only SEK 847bn in deposits (or 38% of total assets), which, in turn, comprised SEK 473bn in household deposits and a significant SEK 374bn in inherently less stable corporate deposits. Domestic household deposits are a relatively scarce funding source in Sweden. Rather than being deposited in banks, savings are often tied up in longer term investments, typically intermediated by insurance or pension companies. These savings are partly recycled into the banking system in the form of wholesale funds, chiefly covered bonds. By volume Sweden s covered bond market is the world s fifth largest after those of Germany, Denmark, France and Spain, and in size equals around half of GDP, a higher proportion than in any other country other than Denmark. As Sweden s largest mortgage lender, Swedbank s funding structure encapsulates this market reality. Thus Swedbank s second most important funding source at YE17 was SEK 512bn in covered bonds, which have a typical maturity between two and seven years, and are used to fund the mortgage book. These have been a mainstay of Swedish banks funding for many years, and command a strong investor base: about two thirds domestically and one third internationally. The main Investors are insurers, banks and asset managers, including pension funds. Besides their reassuringly stable track record including during the crisis -- covered bonds also help lower funding costs and hence boost profitability. 11 June /12

8 Figure 6: Swedbank funding breakdown (YE17) Figure 7: Swedbank s deposit base development (SEK bn) 9% 29% Deposits 8% 1%1% Interbank Bond Funding 1, % Covered Bonds 500 Senior Unsecured 400 Commercial Paper & CDs % Other securities 100 0% Subordinated Debt 0 Source: Company data, Scope Ratings 600 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Households Corporates ex US MMF US MMF Source: Company data, Scope Ratings Swedbank s headline loans to deposits ratio at YE17 was 192% (YE16: 192%), although this falls to 123% if covered bonds are included in the denominator. While the headline deposit figure appears volatile, swings in US money market funds deposits largely explain this (see Figure 7). Core household deposits and corporate deposits have been rising steadily. Swedbank also makes use of senior unsecured debt, subordinated capital instruments, commercial paper and CDs (see Figure 6). Interbank funding is relatively insignificant.we note that should market appetite for Swedish claims diminish (e.g. due to external shocks as experienced during the financial crisis), Swedish banks may experience some refinancing difficulties. That said, there has been a notable improvement in Swedbank s funding profile since YE07, as deposits have increased from 35% of funding to 48% of the total, and reliance on interbank funding has fallen to 4% from 13% of the total. Swedbank has access to a liquidity reserve of SEK 349bn, made up of bonds and central bank balances, and expects that in a scenario of stress it would be able to survive for over one year without capital market access. At 4Q17 the Group s Liquidity Coverage Ratio 5 was 173%. We also note that Swedbank has flexibility to issue additional covered bonds, given that at YE17 the covered bonds in issue were over-collateralised by 85.5%, or SEK 428bn, in the mortgage bank subsidiary s cover pool. 5 Swedish FSA definition 11 June /12

9 I. Appendix: Peer comparison Return on average equity (%) CET1 Ratio (%, fully loaded) Swedbank National Peers International Peers Swedbank National Peers International Peers 18% 26% 16% 14% 12% 10% 8% 6% 4% 2% 24% 22% 20% 18% 16% 14% 12% 0% 10% Cost/income ratio (%) Impaired Loans/Tangible Equity and Reserves (%) Swedbank National Peers International Peers Swedbank National Peers International Peers 70% 50% 65% 45% 60% 40% 35% 55% 30% 50% 25% 45% 20% 15% 40% 10% 35% 5% 30% 0% Loan loss provision charges/net loans (%) Asset risk Intensity (%) Swedbank National Peers International Peers Swedbank National Peers International Peers 0.8% 35% 0.7% 0.6% 30% 0.5% 0.4% 25% 0.3% 20% 0.2% 0.1% 15% 0.0% 10% *Nordic peers: Danske Bank, DNB ASA, Nordea, Handelsbanken, Swedbank, SEB **Cross-border peers: Credit Agricole, BPCE, Credit Mutuel, Lloyds, Nationwide, Rabobank, Intesa Sanpaolo, Commerzbank, Danske Bank, ABN AMRO, CaixaBank, Banco de Sadabell, Handelsbanken, DNB, SEB, Swedbank, La Banque Postale, Bank of Ireland, AIB, Bank of Ireland, Banco BPM, UBI Banca Source: SNL, Scope Ratings. 11 June /12

10 II. Appendix: Selected Financial Information Swedbank Balance sheet summary (SEK m) Assets Cash and interbank assets 141, , , , ,117 Total securities 253, , , , ,353 of w hich, derivatives 64, ,493 87,116 89,293 56,469 Net loans to customers 1,264,910 1,404,507 1,413,955 1,507,247 1,535,198 Other assets 160, , , , ,968 Total assets 1,820,807 2,121,297 2,148,855 2,154,203 2,212,636 Liabilities Interbank liabilities 121, , ,493 71,831 68,055 Senior debt 727, , , , ,204 Derivatives 55,011 85,694 68,681 85,589 46,200 Deposits from customers 620, , , , ,609 Subordinated debt 10,159 18,957 24,613 27,254 25,508 Other liabilities 175, , , , ,488 Total liabilities 1,711,102 2,003,924 2,025,513 2,024,498 2,079,064 Ordinary equity 109, , , , ,372 Equity hybrids Minority interests Total liabilities and equity 1,820,807 2,121,297 2,148,855 2,154,203 2,212,636 Core tier 1/Common equity tier 1 capital 84,606 87,916 93,926 98, ,510 Income statement summary (SEK m) Net interest income 22,029 22,642 22,993 22,850 24,595 Net fee & commission income 10,132 11,169 11,199 11,333 12,030 Net trading income 1,236 1, ,707 1,651 Other income 3,317 3,003 3,145 2,816 3,482 Operating income 36,714 38,495 37,583 38,706 41,758 Operating expense 16,648 16,851 16,333 15,627 16,415 Pre-provision income 20,066 21,644 21,250 23,079 25,343 Credit and other financial impairments ,367 1,285 Other impairments Non-recurring items , Pre-tax profit 19,355 21,026 20,371 23,761 24,542 Discontinued operations -2, Other after-tax Items Income tax expense 4,099 4,301 4,625 4,209 5,178 Net profit attributable to minority interests Net profit attributable to parent 12,901 16,447 15,727 19,539 19,350 Source: SNL Financial 11 June /12

11 III. Appendix: Ratios Swedbank Funding and liquidity Net loans/deposits (%) 149.8% 161.0% 159.0% 168.4% 167.4% Liquidity coverage ratio (%) 168.0% 122.0% 144.0% 155.0% 171.0% Net stable funding ratio (%) 97.0% 98.0% 107.0% 108.0% 110.0% Asset mix, quality and grow th Net loans/assets (%) 69.5% 66.2% 65.8% 70.0% 69.4% Impaired & delinquent loans/loans (%) 1.4% 1.0% 0.8% 0.9% 0.8% Loan-loss reserves/impaired loans (%) 54.0% 52.5% 55.9% 46.4% 45.3% Net loan grow th (%) 2.1% 11.0% 0.7% 6.6% 1.9% Impaired loans/tangible equity & reserves (%) 7.4% 5.8% 5.3% 6.8% 7.1% Asset grow th (%) -1.4% 16.3% 1.3% 0.2% 2.7% Earnings and profitability Net interest margin (%) 1.3% 1.2% 1.1% 1.1% 1.1% Net interest income/average RWAs (%) 4.9% 5.3% 5.6% 5.7% 6.0% Net interest income/operating income (%) 60.0% 58.8% 61.2% 59.0% 58.9% Net fees & commissions/operating income (%) 27.6% 29.0% 29.8% 29.3% 28.8% Cost/income ratio (%) 45.3% 43.8% 43.5% 40.4% 39.3% Operating expenses/average RWAs (%) 3.7% 4.0% 4.0% 3.9% 4.0% Pre-impairment operating profit/average RWAs (%) 4.4% 5.1% 5.2% 5.7% 6.2% Impairment on financial assets /pre-impairment income (%) 0.3% 1.9% 2.8% 5.9% 5.1% Loan-loss provision charges/net loans (%) 0.0% 0.0% 0.1% 0.1% 0.1% Pre-tax profit/average RWAs (%) 4.3% 5.0% 5.0% 5.9% 6.0% Return on average assets (%) 0.7% 0.8% 0.7% 0.8% 0.8% Return on average RWAs (%) 2.9% 3.9% 3.9% 4.9% 4.7% Return on average equity (%) 12.6% 15.1% 13.7% 15.8% 15.4% Capital and risk protection Common equity tier 1 ratio (%, fully loaded) 18.7% 21.2% 24.1% 25.0% 24.6% Common equity tier 1 ratio (%, transitional) 18.7% 21.2% 24.1% 25.0% 24.6% Tier 1 capital ratio (%, transitional) 19.6% 22.4% 26.9% 28.7% 27.3% Total capital ratio (%, transitional) 20.1% 25.5% 30.3% 31.8% 30.7% Leverage ratio (%) 4.6% 4.5% 5.0% 5.2% NA Asset risk intensity (RWAs/total assets, %) 24.8% 19.5% 18.1% 18.3% 18.5% Market indicators Price/book (x) 1.8x 1.8x 1.7x 1.9x 1.7x Price/tangible book (x) 2.1x 2.1x 1.9x 2.1x 1.9x Dividend payout ratio (%) 99.9% 76.6% 75.7% 75.4% 75.1% Source: SNL Financial 11 June /12

12 Scope Ratings GmbH Headquarters Berlin Lennéstraße 5 D Berlin Phone London Suite Angel Square London EC1V 1NY Phone Oslo Haakon VII's gate 6 N-0161 Oslo Phone Frankfurt am Main Neue Mainzer Straße D Frankfurt am Main Phone Madrid Paseo de la Castellana 95 Edificio Torre Europa E Madrid Phone Paris 33 rue La Fayette F Paris Phone Milan Via Paleocapa 7 IT Milan Phone info@scoperatings.com Disclaimer 2018 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope s ratings, rating reports, rating opinions, or related research and credit opinions are provided as is without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D Berlin. Scope Ratings GmbH, Lennéstrasse 5, Berlin, District Court for Berlin (Charlottenburg) HRB B, Managing Director: Torsten Hinrichs. 11 June /12