Cloud over AAA rating for Rabo

Standard & Poor's changed its outlook on the AAA credit rating on senior debt and A-1+ rating on short-term debt assigned to Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., otherwise known as Rabobank Nederland, and its subsidiaries Rabobank Australia and Rabobank New Zealand to negative from stable.

The negative outlook reflects S&P's expectation that the weak economic environment will continue to challenge the banking industry and that Rabobank's balance sheet and performance will be adversely affected by recessions in its key markets.

Impairment losses are expected to remain elevated in the second half of 2009 and into 2010 but a partial offset should come from an increasing net interest margin due to continued asset re-pricing and improved Dutch deposit spreads.

A day earlier, Fitch affirmed its AA+/Stable/F1+ ratings on Rabobank. Fitch said, Rabobank's ratings reflect management's long-term and low-risk approach to banking, a coherent and focused strategy, robust capitalisation, earnings that proved resilient during the global financial crisis and a strong franchise in domestic retail banking and globally in food and agri-business.

Rabo continues to hold a Aaa rating from Moody's.

Rabobank Nederland has A$1.4 billion of bonds outstanding in the domestic market and its Australian branch has A$3.4 billion of bonds outstanding. In New Zealand the bank has NZ$1.18 billion of bonds outstanding and its branch has NZ$650 million outstanding.

Moody's placed its 'A2' senior debt rating assigned to WestLB on review for possible downgrade but changed the outlook on the 'E+' bank financial strength rating to developing, from negative. The review will focus on the impact of WestLB's changing business profile and the likelihood of a gradual decline in its systemic relevance after the completion of the "bad bank" structure in April 2010.

WestLB has only A$650 million of December 2010 bonds on issue in the domestic market, guaranteed by the Commonwealth government.