OREANDA-NEWS. Fitch Ratings has revised Bremer Landesbank Kreditanstalt Oldenburg - Girozentrale's (BremerLB) Outlook to Stable from Negative, while affirming the Long-Term Issuer Default Rating (IDR) at 'A-'. The Short-Term IDR has been upgraded to 'F1' from 'F2'. A full list of rating actions is available at the end of this rating action commentary.

The rating action follows the recent announcement that the City of Bremen (41.2%) and the Sparkassen Association of Lower Saxony (4%) will sell their shares in Bremer LB to Norddeutsche Landesbank Girozentrale (NORD/LB; A - Stable/F1/bb+), which will subsequently become the 100% owner of Bremer LB.

The Outlook revision reflects our view that the announced takeover has reaffirmed the commitment of BremerLB's owners to provide support to the bank in a way that is consistent with EU state aid rules. As the bank will become a wholly-owned subsidiary of NORD/LB, we now expect support to be provided by the parent bank, whose rating is driven by support from its owners.

The takeover follows the announcement by BremerLB in June that it expects a large loss for 2016, driven by value adjustments in its shipping portfolio, which could threaten its capitalisation. We understand from management that the bank's owners are committed to ensuring adequate capitalisation for BremerLB, but that a buy-out by NORD/LB was preferred to avoid triggering state aid proceedings.

KEY RATING DRIVERS

IDRS, NATIONAL RATINGS AND SENIOR DEBT

BremerLB's IDRs and senior debt ratings are equalised with those of NORD/LB. The IDRs of NORD/LB are driven by support from its owners, the States of Lower Saxony and Saxony-Anhalt, the regional savings banks, and ultimately Sparkassen-Finanzgruppe (Sparkassen) (SFG, A+/Stable).

The ratings reflect our expectation that BremerLB would be supported by its parent, as evidenced by the takeover announcement. We expect BremerLB, which is already consolidated in the parent's accounts, to be an integral part of the NORD/LB group, and the full acquisition could result in cost efficiency and more efficient capital management at the group.

We also believe that a default of BremerLB would constitute a significant reputational risk for NORD/LB and its owners as it would signal weakness in NORD/LB's own viability and a diminished political will to provide support to the Landesbanken by their ultimate owners, which in turn could have implications for the whole Landesbank sector.

BremerLB's 'F1' Short-Term IDR is the higher of the two Short-Term IDRs that map to an 'A-' Long-Term IDR on Fitch's rating scale and reflects our expectation that BremerLB will have access to liquidity from its owner, which itself has strong links to affiliated savings banks with ample liquidity and funding resources.

RATING SENSITIVITIES

IDRS, SUPPORT RATINGS AND SENIOR DEBT

BremerLB's support-driven ratings are primarily sensitive to changes in NORD/LB's IDRs. NORD/LB's IDRs are primarily sensitive to changes to the owners' propensity or ability to provide timely support. A change in the ability would be indicated by a change in SFG's IDRs. NORD/LB's IDRs are also sensitive to changes to the owners' strategic commitment and to the importance of NORD/LB for its respective home region or for the savings banks sector.

BremerLB's IDRs, SR and senior debt are also sensitive to a change in Fitch's assumptions around NORD/LB's ability and propensity to provide support.

The rating actions are as follows:

Bremer Landesbank

Long-Term IDR: affirmed at 'A-'; Outlook revised to Stable from Negative

Long-term senior debt: affirmed at 'A-'

Short-Term IDR and short-term senior debt: upgraded to 'F1' from 'F2'

Support Rating: affirmed at '1'

Viability Rating: 'bb'; not affected