Semiannual update. Summary rating rationale. Exhibit 1 Rating Scorecard - Key financial ratios. Capital: Tangible Common Equity/Risk-Weighted Assets

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1 CREDIT OPINION 6 July 17 Update Raiffeisenlandesbank NiederoesterreichWien Semiannual update Summary rating rationale RATINGS Raiffeisenlandesbank NiederoesterreichWien Domicile Vienna, Austria Long Term Debt Baa Type Senior Unsecured Dom Curr Outlook Stable Long Term Deposit Baa Type LT Bank Deposits - Fgn Curr Outlook Stable Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date. We assign Baa/P- senior debt and deposit ratings with stable outlooks to Raiffeisenlandesbank Niederoesterreich-Wien (RLB NOE). We further assign a ba Baseline Credit Assessment (BCA) and Baa1(cr)/P-(cr) Counterparty Risk Assessments (CR Assessments). The ratings reflect (1) the ba BCA; () the ba1 Adjusted BCA, which incorporates very high affiliate support from Raiffeisen Banking Group (RBG) and results in one notch of rating uplift from the bank's BCA; and () the result of our Advanced Loss Given Failure (LGF) analysis, which takes into account the severity of loss faced by the different liability classes in resolution and results in two notches of rating uplift for RLB NOE's senior obligations and deposits from the ba1 Adjusted BCA. RLB NOE's ba BCA reflects the bank's adequate capitalisation, improved asset quality and sound funding profile. At the same time, the bank's high profit volatility and substantial tail risks linked to its participations constrain its BCA. Exhibit 1 Rating Scorecard - Key financial ratios RLB NOE (BCA: ba) Analyst Contacts Carola Schuler Managing Director Banking carola.schuler@moodys.com 51% 1% Solvency Factors Alexander Hendricks, CFA Associate Managing Director - Banking alexander.hendricks@moodys.com 61% 1% 41% 8% 1% 6% 1% 4% % 11% 5.1% 5.5% 1.7% 9.8% 1% % -% Asset Risk: Problem Loans/ Gross Loans Capital: Tangible Common Equity/Risk-Weighted Assets Solvency Factors (LHS) Source: Moody's Financial Metrics -.% Profitability: Net Income/ Tangible Assets -9% Funding Structure: Market Funds/ Tangible Banking Assets Liquid Resources: Liquid Banking Assets/Tangible Banking Assets Liquidity Factors (RHS) Liquidity Factors Katharina Barten Sr Vice President katharina.barten@moodys.com Median ba-rated banks 14%

2 Credit strengths Asset risk has recovered from earlier pressures, and nonperforming loans are now more in line with the Austrian average. RLB NOE has a sound and diversified funding profile. Senior creditors benefit from a large volume of outstanding debt and subordinated instruments, and therefore very low loss severity in the unlikely event of resolution. Credit challenges During the two years to 16, RLB NOE's regulatory and balance sheet capital eroded in absolute terms, and the bank had to reduce risk-weighted assets in order to avoid a weakening of its regulatory capital ratios. Capitalisation remains vulnerable to valuation pressures on the large ownership stake in Raiffeisen Bank International AG (RBI, Baa1 stable/baa1 stable, ba)1. RLB NOE's profitability is highly volatile, and the bank's results strongly depend on the earnings from RBI. Rating outlook The outlook on RLB NOE's long-term ratings is stable, reflecting our expectation that the bank will be able to sustain adequate capitalisation and contain asset risk. Factors that could lead to an upgrade The bank's ratings would be upgraded if (1) stronger fundamentals justify a rise in the BCA by more than one notch because an upgrade by one notch would likely be offset by the removal of the one notch of affiliate support uplift; () RBG's financial strength improves such that it results in more than one notch of affiliate support uplift for RLB NOE; or () the bank were to increase the volume of subordinated instruments, which would lead to an additional rating uplift, as assessed in our LGF analysis. Upward pressure on RLB NOE's BCA would arise if the bank addresses risk concentrations and demonstrates that it can sustain the positive trend in its asset-quality metrics and improve its capital-generation capacity. Factors that could lead to a downgrade A downgrade would be prompted if (1) we were to lower RLB NOE's BCA; and, at the same time () RBG's fundamentals were to weaken to a level that the downgrade cannot be offset by higher affiliate support; or () the volume of senior unsecured liabilities materially declined, as this would raise the loss-given-failure for senior creditors. The latter could prompt a weaker result from our LGF analysis. Negative pressure on RLB NOE's BCA could result from a material weakening of RLB NOE's profitability and capital ratios, or indications of materially rising asset risks. This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history. 6 July 17

3 Key Indicators Exhibit Raiffeisenlandesbank Niederoesterreich-Wien (Consolidated Financials) [1] Total Assets (EUR billion) Total Assets (USD billion) Tangible Common Equity (EUR billion) Tangible Common Equity (USD billion) Problem Loans / Gross Loans (%) Tangible Common Equity / Risk Weighted Assets (%) Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) Net Interest Margin (%) PPI / Average RWA (%) Net Income / Tangible Assets (%) Cost / Income Ratio (%) Market Funds / Tangible Banking Assets (%) Liquid Banking Assets / Tangible Banking Assets (%) Gross Loans / Due to Customers (%) CAGR/Avg [1] All figures and ratios are adjusted using Moody's standard adjustments [] Basel III - fully-loaded or transitional phase-in; IFRS [] Basel II; IFRS [4] May include rounding differences due to scale of reported amounts [5] Compound Annual Growth Rate (%) based on time period presented for the latest accounting regime [6] Simple average of periods presented for the latest accounting regime. [7] Simple average of Basel III periods presented Source: Moody's Financial Metrics Detailed rating considerations With total assets of 5.4 billion as of December 16, RLB NOE is the second largest of the eight Raiffeisenlandesbanken in Austria, with operations mainly in the State of Lower Austria and its capital Vienna. RLB NOE is majority-owned by 6 local primary credit cooperatives (Kreditgenossenschaften) in the region, for which the bank is the central institution. As of December 16, the bank's risk profile was heavily influenced by the 4.7% stake, equivalent to a book value of 1.7 billion, in the sector's former central institution Raiffeisen Zentralbank Oesterreich AG (RZB). Following RZB's merger with RBI in March 17, RLB NOE is now the single-largest direct shareholder in RBI, with a.6% share. In addition, the Raiffeisen-Holding NiederoesterreichWien, which owns RLB NOE, has a large portfolio of industrial investments, including in sectors such as media and real estate. Although it indirectly benefits from geographical diversification, the bank strongly relies on income derived from its participations. The bank reports its financials based on the International Financial Reporting Standards. Driven by RLB NOE's very modest solvency metrics (its metrics and combined score for liquidity and funding are much stronger), we position the BCA at the lower end of the indicated baa-ba range that our BCA Scorecard indicates. Capitalisation is adequate, but vulnerable to impairments and charges related to its stake in RBI RLB NOE's capitalisation is adequate, but remains vulnerable to impairment charges on its sizeable shareholdings, in particular the large ownership stake in RBI. Given the gradual stabilisation of RBI's performance, RLB NOE has better prospects to retain equity in 17-18, after absolute capital levels and regulatory capital ratios were mostly under pressure during the last five years. Only in 15 was RLB NOE able to bolster its capitalisation through retaining profits. In all other periods since 1, RLB NOE reported capital erosion, although the group was able to raise its regulatory capital ratios. At the highest consolidation level, the transitional ratio of Common Equity Tier 1 capital to risk-weighted assets (RWA) was 14.% as of December 16, up from 1.8% as of December 15, under the Capital Requirements Regulation and Directive (CRR/CRD IV). On a fully phased-in basis, the ratio was 1.7% (15: 1.7%). The improvement was driven by a 7% reduction in RWA to 1. billion. The decrease in RWA more than offset the negative effects of a 19 million impairment of RLB NOE's stake in the former RZB (15: impairment of 99 million), and depressed core profits in 16. The CET1 capital in absolute terms declined by 74 million, or 4%, to 1.89 billion. The group's transitional leverage ratio (under the CRR) declined to 6.8% at year-end 16, from 7.% in July 17

4 The bank faces various risks to capital, specifically from (1) its highly concentrated equity investments, and () evolving regulation that could result in higher RWA over the next year. The at-equity consolidated 1.7 billion stake in the former RZB as of December 16 represented a very large concentration relative to RLB NOE Group's 1.89 billion CET1 capital and our measure of 1.69 billion tangible common equity (TCE). RLB NOE credits (or charges) the proportionate net result of RBI to its income statement, together with any impairment charges, as may be required. To that extent, pressure on RBI can be amplified because any large loss at RBI also strains the valuation of RLB NOE's stake. In addition, structural measures, such as the asset sales in 16, at RZB Group can trigger impairment charges. In the three years to 16, RLB NOE had to charge to its income statement a net aggregate amount of 756 million on the former RZB. Prospective changes in RWA, which could adversely affect the bank's regulatory capital ratios, could result from adjustments to the currently applicable (and relatively favourable) risk weightings for participations and collateralised real estate exposure, in the context of the targeted harmonisation of risk weights under Basel III. To take account of the risks stated above, we simulate an impairment of RLB NOE's stake in RBI and its other participations, which we discount from its TCE, and adjust the Capital score accordingly, resulting in a ba score. Profitability is very volatile owing to the bank's dependence on RBI's earnings RLB NOE's returns have historically been very volatile. The bank's 64 million net loss in 16 once more absorbed valuable capital resources. The volatility has mostly been driven by varying contributions from and valuation changes relating to participations, in particular its large stake in the former RZB. Other challenges relate to the bank's high cost structure, as illustrated by cost-to-income ratios that were consistently above 75% in the five years to December 16. These considerations are reflected in the assigned Profitability score of b. For 16, RLB NOE reported a 64 million net loss (15: 65 million profit). The significant decrease from the year-earlier period was only partly attributable to a 99 million loss from at-equity participations, because the result was also strained by eroding revenue. Net interest income declined 8% to 174 million, and net fee and commission income by 1% to 5 million on lower fee income across transaction banking products and services. In addition, the result from financial investments declined 7% to 17 million on lower gains from the disposal of available-for-sale and fair-value securities. Despite various streamlining efforts, operating costs were slightly higher at 6 million (up.6%), driven by regulatory and IT expenses. The performance of RBI and RLB NOE's other investments is a key driver for the bank's profitability. In 16, the investments segment reported a large 151 million pre-tax loss, after a 9 million pre-tax loss in 15. A 19 million impairment charge on RLB NOE's stake in the former RZB drove the segmental loss in 16, although this impairment was partly offset by RZB's 88 million profit contribution. The losses contributed by the investments segment ( 151 million) and the other segment ( 9 million; the other segment includes one-fourth of the group's total costs) are large in the context of RLB NOE's 1 million pre-tax profit contributions from its three core banking segments. The core segments include retail banking (including services for the regional co-operative banks), corporate clients and financial markets. Given the headwinds of revenue pressure and our expectation that risk charges will gradually normalise (after a net release in 16) and gains on asset sales may not be reiterated, RLB NOE will be challenged to improve core profits in At the same time, we expect the large negative effects from investments to not be reiterated in 17-18, which will remain vital for the bank to generate profits and capital. Problem loans are declining, but concentration risks remain RLB NOE's problem loan ratio continued to improve in 16. The bank reported 47 million in impaired loans (including performing loans 9 days past due) as of December 16, compared with 6 million 1 months earlier. Based on these amounts, the bank's problem loan ratio was 4.% as of year-end 16, down from 5.% a year earlier. The bank's nonperforming loan ratio is now more in line with the Austrian average. RLB NOE's provisioning compared with problem loans gradually increased in recent years, and reached an adequate level close to 51% as of December July 17

5 RLB NOE's lending activities are primarily focused on corporate customers in the State of Lower Austria and the city of Vienna. However, the bank's 11.8 billion loan book comprised only 47% of total assets as of December 16. In the context of its investments, securities holdings and exposure to banks, we consider non-lending credit risk as material. In addition, the bank's 14.9 billion exposure to retail and corporate clients displays major sector concentrations. The largest concentration was in the real estate and construction sectors, with an exposure of 5. billion, representing % of total retail and corporate client exposure as of December 16. The respective risks are reflected in the baa Asset Risk score. The funding profile is diversified and not very sensitive to investor confidence RLB NOE's structural liquidity profile is sound, owing to its deposit-rich funding profile that benefits from access to the free cash positions of the primary credit co-operatives. These smaller banks place excess liquidity and minimum reserve requirements with RLB NOE. The bank's structural liquidity profile additionally benefits from retail demand for bonds and notes issued by the bank. In terms of balance-sheet structure, interbank funds remain the main contributor to the bank's total funding, at around % of total assets as of December 16. The volumes of interbank borrowings and outstanding securities, which account for % of total assets (including covered bonds), are the key drivers for the bank's high market funding ratio. However, for our assessment of the bank's funding profile, we make favourable adjustments for funds received from primary credit co-operatives and development banks because their funds deposited at RLB NOE are of a revolving nature. This leads to a ba1 Funding Structure score. The bank had.7 billion in cash and unencumbered securities on its balance sheet, and reported a strong liquidity coverage ratio of 14% as of December 16. This good level of liquidity supports the baa1 Liquid Resources score. RLB NOE's ratings are supported by its Macro Profile of Strong+ RLB NOE's Macro Profile is Strong+, at the same level as Austria's (Aa1 stable4) Macro Profile, because the bank's assets are primarily generated in its home market. Austria's Strong+ Macro Profile reflects the country's stable economic environment, with a robust institutional and legal framework, sound government finances and a low susceptibility to adverse events. Despite rising house prices, private sector debt is low and declining, further supporting the credit conditions. Our Macro Profile also takes into account the banking sector's high market fragmentation, low fee income generation and intense competition for domestic business. Notching considerations Affiliate support We consider the likelihood of support from RBG, the Austrian Raiffeisen sector, to be very high owing to RLB NOE's vital regional importance to the sector. This support materially reduces the probability of default because the co-operative group cross-sector support mechanism aims to stabilise its members by avoiding a bail-in or any form of loss participation by creditors. Taking into account the financial strength of RBG and the very high probability of RLB NOE receiving support, cross-sector support currently results in a one-notch rating uplift for the bank's ratings from its ba BCA. We assess the Austrian Raiffeisen sector's financial capacity to provide support to its members based on the cooperative group's combined financial strength. Although their combined financial strength has recently stabilised, we still consider the group's capitalisation as moderate compared with its overall credit profile, which is strongly correlated with its higher-risk Central and Eastern European exposures, housed at RBI. Loss-given-failure RLB NOE is subject to the EU Bank Recovery and Resolution Directive, which we consider to be an operational resolution regime. We assume residual TCE of % and losses post-failure of 8% of tangible banking assets, a 5% run-off in junior wholesale deposits, a 5% run-off in preferred deposits, and assign a 5% probability to deposits being preferred to senior unsecured debt. These metrics are in line with our standard assumptions. 5 RLB NOE's deposits are likely to face very low loss-given-failure, resulting in two notches of rating uplift from the ba1 Adjusted BCA. 6 July 17

6 RLB NOE's senior obligations are also likely to face very low loss-given-failure, resulting in two notches of rating uplift from the ba1 Adjusted BCA. For senior subordinated debt issued by RLB NOE and rated Ba, our LGF analysis indicates a high loss-given-failure, positioning this rating one notch below the ba1 Adjusted BCA. Government support In contrast to banks in other EU countries and reflective of government measures in Austria implemented since 14, we have assigned a low level of support for the senior debt and deposit ratings of Austrian banks. As a consequence, we do not include any beneficial rating impact for government support in RLB NOE's debt and deposit ratings, despite the strong national market shares and systemic relevance of the Raiffeisen sector as a whole to the country's banking system. About Moody's Bank Scorecard Our Scorecard is designed to capture, express and explain in summary form our Rating Committee's judgement. When read in conjunction with our research, a fulsome presentation of our judgement is expressed. As a result, the output of our Scorecard may materially differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strong divergence). The Scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down to reflect conditions specific to each rated entity. 6 6 July 17

7 Rating Methodology and Scorecard Factors Exhibit Raiffeisenlandesbank Niederoesterreich-Wien Macro Factors Weighted Macro Profile Strong + Factor Historic Macro Ratio Adjusted Score Credit Trend Assigned Score Key driver #1 Key driver # Solvency Asset Risk Problem Loans / Gross Loans 5.1% baa baa Capital TCE / RWA 1.7% a ba1 Stress capital resilience Capital retention Profitability Net Income / Tangible Assets -.% caa1 b Expected trend Earnings quality Extent of market funding reliance Deposit quality Combined Solvency Score Liquidity Funding Structure Market Funds / Tangible Banking Assets 5.5% Liquid Resources Liquid Banking Assets / Tangible Banking Assets baa 9.8% b a1 ba1 Balance Sheet in-scope (EUR million) 1,144 7,618 5,67 1,981, ,99 6 July 17 Sector concentration Non lending credit risk ba Combined Liquidity Score Financial Profile Business Diversification Opacity and Complexity Corporate Behavior Total Qualitative Adjustments Sovereign or Affiliate constraint: Scorecard Calculated BCA range Assigned BCA Affiliate Support notching Adjusted BCA Other liabilities Deposits Preferred deposits Junior Deposits Senior unsecured bank debt Dated subordinated bank debt Equity Total Tangible Banking Assets 7 1% ba1 baa1 Asset encumbrance Intragroup restrictions baa ba1 Aa1 baa-ba ba -ba1 % in-scope 47.8%.%.% 7.8% 15.5%.7%.% 1% at-failure (EUR million) 1,144 7,618 5,56 1,486, ,99 % at-failure 47.8%.% 1.1% 5.8% 15.5%.7%.% 1%

8 Debt class Counterparty Risk Assessment Deposits Senior unsecured bank debt Dated subordinated bank debt Instrument class De Jure waterfall De Facto waterfall Notching LGF Assigned Additional Preliminary LGF notching Rating Instrument Sub- Instrument SubDe Jure De Facto Notching Guidance notching Assessment volume + ordination volume + ordination vs. subordination subordination Adjusted BCA 8.% 8.% 8.% 8.% baa1 (cr) 8.% 6.7% 8.%.% baa 8.% 6.7%.% 6.7% baa 6.7%.% 6.7%.% ba Loss Given Failure notching Counterparty Risk Assessment Deposits Senior unsecured bank debt Dated subordinated bank debt -1 Additional Preliminary Rating Notching Assessment baa1 (cr) baa baa ba Government Support notching Local Currency Rating Baa1 (cr) Baa Baa Ba Foreign Currency Rating -Baa --- Source: Moody's Financial Metrics Ratings Exhibit 4 Category RAIFFEISENLANDESBANK NIEDEROESTERREICHWIEN Outlook Bank Deposits Baseline Credit Assessment Adjusted Baseline Credit Assessment Counterparty Risk Assessment Issuer Rating -Dom Curr Senior Unsecured -Dom Curr Subordinate -Dom Curr ST Issuer Rating -Dom Curr Moody's Rating Stable Baa/P- ba ba1 Baa1(cr)/P-(cr) Baa Baa Ba P- Source: Moody's Investors Service 8 6 July 17

9 Endnotes 1 The ratings shown are RBI's deposit rating and outlook, its senior unsecured debt rating and outlook, and its BCA. Raiffeisen-Holding NOE-Wien is the regulated entity. Being part of the Institutional Protection scheme of RBG, RLB NOE enjoys the privilege of favourable risk weights for intra-sector participations and exposures; the vast majority of its participations are weighted at 1%. 4 The rating shown is the sovereign bond rating and outlook. 9 6 July 17

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11 Contacts Katharina Barten Senior Vice President 11 6 July 17 CLIENT SERVICES Maryna Harbal Associate Analyst maryna.harbal@moodys.com Americas Asia Pacific Japan EMEA