S&P cuts Hypo Real Estate outlook to negative

Standard & Poor's said it revised its outlook on all seven rated entities of Hypo Real Estate group to negative from stable on the release of lower-than-expected results for 2007 and on weaker profitability prospects for 2008.

At the same time, the A/A-1 long- and short-term counterparty credit ratings on Hypo Real Estate Bank International AG, Hypo Real Estate Bank AG and Depfa Deutsche Pfandbriefbank AG were affirmed, S&P said.

In addition, the agency said that the A+/A-1 counterparty credit ratings on Depfa Bank plc (Depfa), Depfa ACS, Hypo Public Finance Bank and Hypo Pfandbrief Bank International SA were also affirmed, meaning a continued one-notch rating differential between Pfandbriefbank and the commercial mortgage lenders and the members of the Depfa subgroup, which mainly focuses on public finance and infrastructure finance.

The agency added that the rating actions reflect its view that the Hypo Real Estate group might face a period of lower profitability, making it difficult to maintain its track record of achieving earnings targets and to reduce the capital leverage following the Depfa acquisition via earnings retention.

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