Credit Opinion: Bausparkasse Mainz AG

Transcription

1 Credit Opinion: Bausparkasse Mainz AG Global Credit Research - 16 Jul 2014 Mainz, Germany Ratings Category Moody's Rating Outlook Stable Bank Deposits Baa1/P-2 Bank Financial Strength C- Baseline Credit Assessment baa1 Adjusted Baseline Credit Assessment baa1 Contacts Analyst Phone Bernhard Held/Frankfurt am Main Swen Metzler/Frankfurt am Main Carola Schuler/Frankfurt am Main Johannes Binder/Frankfurt am Main Key Indicators Bausparkasse Mainz AG (Unconsolidated Financials)[1] [2]12-13 [2]12-12 [2]12-11 [2]12-10 [2]12-09 Avg. Total Assets (EUR million) 2, , , , ,477.7 [3]-0.4 Total Assets (USD million) 3, , , , ,554.8 [3]-1.4 Tangible Common Equity (EUR million) [3]-1.4 Tangible Common Equity (USD million) [3]-2.4 Net Interest Margin (%) [4]1.3 PPI / Average RWA (%) [5]0.9 Net Income / Average RWA (%) [5]0.1 (Market Funds - Liquid Assets) / Total Assets (%) [4]4.8 Core Deposits / Average Gross Loans (%) [4]84.9 Tier 1 Ratio (%) [5]9.1 Tangible Common Equity / RWA (%) [5]9.0 Cost / Income Ratio (%) [4]73.9 Problem Loans / Gross Loans (%) [4]2.0 Problem Loans / (Equity + Loan Loss Reserves) (%) [4]32.6 Source: Moody's [1] All figures and ratios are adjusted using Moody's standard adjustments [2] Basel II; LOCAL GAAP [3] Compound Annual Growth Rate based on LOCAL GAAP reporting periods [4] LOCAL GAAP reporting periods have been used for average calculation [5] Basel II & LOCAL GAAP reporting periods have been used for average calculation Opinion SUMMARY RATING RATIONALE Bausparkasse Mainz AG's (BKM) long and short-term deposit ratings of Baa1/Prime-2 incorporate our view of a

2 low probability of systemic support for smaller institutions in light of the existing resolution regime in Germany. As a result, the long-term debt ratings do not receive any rating uplift from external support and is thus aligned with BKM's baseline credit assessment (BCA) of baa1. BKM's standalone bank financial strength rating (BFSR) of C-, equivalent to a baa1 BCA, reflects: (1) BKM's defensible franchise in its niche market; (2) its good funding and liquidity management framework; and (3) its highly collateralised and granular loan book, predominantly invested in German retail residential mortgages. However, the rating remains constrained by: (1) BKM's narrow business model focused on a single product; (2) increasing pressure on profitability resulting from the persistent low interest-rate environment as well as continued strong competition; (3) BKM's only adequate capitalisation coupled with a limited internal capital-generation capacity; (4) a potential rise in risk charges under an adverse economic scenario, which could exert pressure on BKM's capital adequacy; and (5) credit and market risk inherent in the bank's securities portfolio. Rating Drivers - Franchise under pressure from persistent low interest-rate environment and strong competition - Profitability expected to remain subdued - Capital ratios remain modest and constrained by internal weak capital generation capacity - Sound asset quality given highly granular and collateralised loan book - Adequate liquidity in light of diversified and less confidence-sensitive funding profile Rating Outlook The outlook on all ratings is stable, reflecting BKM's defensible franchise in its niche market. What Could Change the Rating - Up We see very limited upside potential for BKM's ratings at this time. However, a significantly stronger financial profile, reflected in a sustained increase in profitability and capital ratios, whilst maintaining asset quality and improving its overall risk profile, might have positive implications for the C- BFSR and consequently the firm's longterm deposit ratings. What Could Change the Rating - Down A downgrade of BKM's ratings could be triggered by a weakening of its financial profile, in particular if increased loan losses, continued low interest-rates and/or realised losses on its securities portfolio exert additional pressure on BKM's low profitability, resulting in undue strain on capital. The BFSR would also come under pressure if BKM's ability to earn its cost of capital remains constrained. DETAILED RATING CONSIDERATIONS FRANCHISE UNDER PRESSURE DUE TO PERSISTENT LOW INTEREST-RATE ENVIRONMENT AND STRONG COMPETITION As BKM is almost exclusively dependent on one business line, namely mortgage savings and loan contracts, we classify BKM as a monoline institution being vulnerable to potential changes in market dynamics which - in an adverse scenario - could be sudden and unpredicted with no offsetting earnings stream. BKM contends with intense competition from other building societies and, increasingly, deposit-taking retail banks. Although it has historically derived much of its franchise strength from its ability to provide housing finance at low and stable interest rates, the persistent low interest-rate environment has intensified competition between mortgage providers overall. BKM also offers insurance products on behalf of its main shareholder, INTER- Versicherungsgruppe (unrated) which - directly and indirectly - owns 100% of BKM following a take-over and subsequent squeeze-out offer in H BKM has a very modest national market share in the German private building society sector of around 1% and no activities outside Germany. It is positioned in the lower mass affluent client segment, predominantly in Western Germany; and has a particularly strong foothold among the immigrant population including Turkish, but also Italian, Spanish and Portuguese clients.

3 BKM is a building society (Bausparkasse), a specialist financial institution providing residential housing-related savings and loan products to predominantly retail customers. Its traditional loan product is the "Bauspardarlehen" (mortgage savings loan), on which depositors acquire a call option if they have saved a specific amount over a certain period of time. BKM is subject to the provisions of the special banking act for German home savings and loan institutions (Bausparkassengesetz), under which: (1) commercial real-estate financing is limited to 3% of aggregate loans; and (2) maximum loan exposure to un-allotted large contracts (contracts exceeding EUR300,000) is limited to 15% of the total un-allotted credit volume. At the current stage, BKM is not active in CRE financing. PROFITABILITY EXPECTED TO REMAIN SUBDUED In our opinion, BKM's earnings-generation capacity is poor, reducing its capacity to strengthen and expand its existing franchise, and to withstand the negative impact of competitive challenges and the risks intrinsic to its business model. BKM has a relatively high cost base given its small size and lack of economies of scale as displayed by its cost/income ratio of 78.0% (79.6% in 2012).BKM's 2013 net interest income as well as fee and commission income remained close to the subdued levels of 2012 as interest-rate risk hedging costs continued to weigh on net interest income and as customer demand for drawing loans out of existing contracts at high loan interest rates did not recover. We positively note that BKM's new mortgage savings and loan tariff introduced in March 2013 which offers customers more attractive loan rates has been well received by clients, leading to increased new contract sales in BKM reported a pre-tax profit of EUR2.6 million in 2013, up from 1.5 million in We expect that the low interest-rate environment will continue to exert pressure on BKM's outstanding mortgage-loan volumes and hence its profitability prospects, given that the mortgage products from Bausparkassen work best from a competitive standpoint in a higher interest rate environment. Despite the ongoing pressure on profitability, and in the absence of any adverse events exerting an impact on BKM's profitability, we would expect BKM to report low, but positive net results in 2014 and Longer term, we believe that further cost and efficiency efforts would be required to restore underlying earnings-generation capacity and to withstand pressure from continued low interest-rates. CAPITAL RATIOS REMAIN MODEST AND CONSTRAINED BY INTERNAL WEAK CAPITAL GENERATION CAPACITY Basel II capitalisation levels are currently modest, as reflected by BKM's total capital ratio of 12.1% (2011: 12.0%) and its moderate Tier 1 ratio of 10.2% at year-end 2013 (2012: 9.9%). Total risk-weighted assets remained stable at EUR1.13 billion in 2013 (2012: EUR1.16 billion), while total assets declined by 5.3% to EUR2.4 billion. We highlight that the bank measures its risk-weighted assets (RWA) according to the Basel II standard approach. Given the high level of collateralisation in BKM's loan book, we estimate RWA to be significantly lower if BKM decided to apply the internal rating-based (IRB advanced) approach. We also expect the application of Basel III capital and particularly asset risk-weighting rules to have a beneficial impact on BKM's reported capital ratios going forward. As mentioned above, internal capital generation remains constrained by BKM's poor profitability and we would expect this to continue over the next years. Nevertheless, BKM's capitalisation levels are mitigated by the institution's moderate risk profile due to its focus on highly granular residential real-estate lending. In contrast to the risk-based capital ratios, BKM's 2013 leverage ratio measured by Tier 1 capital to total assets, stood at a more satisfactory 4.7%. SOUND ASSET QUALITY GIVEN HIGHLY GRANULAR AND COLLATERALISED LOAN BOOK BKM's mortgage savings and loan-contract offerings traditionally suffer from low demand during periods of low interest rates. Although the bank benefitted from a strong rise in deposits since the onset of the financial crisis, loan growth has remained subdued in 2013, resulting in a further decline in customer loans to EUR1.86 billion (2012: EUR1.93 billion). The credit risk of BKM's loan book is low, as reflected by the institution's focus on residential mortgage lending (accounting for 76% of total assets) and the inherent high portfolio granularity. In addition, risks to asset quality are mitigated by the fact that borrowers have to prove their payment discipline by (1) building a deposit base with BKM before being granted the loan; or (2) by building such deposits at a speed above average mortgage loan amortization schedules during the bridge financing period. For loans subject to the Bausparkassengesetz, the maximum loan-to-value (LTV) ratio is 80%.

4 BKM's residential mortgage loan book, splits up into (1) traditional mortgage loans sourced from mortgage savings contracts (9% of all customer loans); (2) bridge financings for residential property (61%) and other residential realestate loans (28%). As of year-end 2013, 98% of the building society's loan book (which accounts for 61% of its total assets) benefits from collateralisation or guarantees, expressing the low-risk nature of BKM's underlying mortgage lending business. The credit-risk concentrations (borrower and industry concentrations) within BKM's loan book are low, as reflected in the related high portfolio granularity. Loans subject to specific loan loss reserves accounted for 2.2% as of year-end 2013, up from 1.7% as of yearend 2012 as the bank registered an increase in impairments on loans made to individuals. The reported problem loan metric is low compared with banking peers in Germany, however, we note that the published problem loans under local GAAP (HGB) may understate downside risk as they do include only amounts where loan loss provisions have been built ('past due and impaired'). Absent of loan growth, BKM invested excess liquidity in a securities portfolio making up a significant EUR530 million or 22% of total assets as of year-end The portfolio mostly comprises highly-rated financial institutions, corporate exposures and euro-area sovereigns and is generally managed under an adequate credit-limit management system. However, risk concentrations related to euro-area peripheral issuers (EUR98 million or 84% of the bank's core Tier 1 capital as of end-2013), may exert pressure on BKM's capital adequacy ratios in an adverse scenario of renewed heightened turbulence in the European debt markets. On a more positive note, according to the special banking act for the German Bausparkassen ("Bausparkassengesetz"), BKM is a nontrading institution and cannot invest in equity or hybrid capital, thus limiting overall investment risk. ADEQUATE LIQUIDITY IN LIGHT OF DIVERSIFIED AND LESS CONFIDENCE-SENSITIVE FUNDING PROFILE Over the past years, BKM was successful in building up a retail-based funding franchise by offering moneymarket and term-deposits to private customers at competitive rates via the internet. Although we regard these deposits as inherently more confidence-sensitive and thus less sticky than traditional retail deposits, we highlight that the retail deposit base now represents EUR1.8 billion or 72% of total assets as of end 2013 and has meaningfully diversified BKM's previously wholesale-dominated funding profile. Interbank financing accounts for EUR410 million or 17% of total assets. Although interbank funding is more creditsensitive, particularly as it is largely sourced via brokers, we take comfort from the fact that it is largely long term, relates to promissory notes (Schuldscheindarlehen) primarily sourced from the German savings and co-operative banks sector and also encompasses minor funding sources related to promotional lending. In addition, BKM's securities portfolio contains sufficient central bank eligible assets to counter unexpected liquidity outflows. Thus, we consider BKM's overall liquidity profile as adequate. Global Local Currency Deposit Rating (Joint Default Analysis) We assign a Baa1 global local-currency (GLC) deposit rating to BKM, which is based solely on its baa1 BCA. Foreign Currency Deposit Rating BKM's foreign-currency deposit rating is Baa1 with a stable outlook. ABOUT MOODY'S BANK RATINGS Bank Financial Strength Ratings Moody's Bank Financial Strength Ratings (BFSRs) represent Moody's opinion of a bank's intrinsic safety and soundness and, as such, exclude certain external credit risks and credit support elements that are addressed by Moody's Bank Deposit Ratings. BFSRs do not take into account the probability that the bank will receive such external support, nor do they address risks arising from sovereign actions that may interfere with a bank's ability to honour its domestic or foreign currency obligations. Factors considered in the assignment of BFSRs include bank-specific elements such as financial fundamentals, franchise value, and business and asset diversification. Although BFSRs exclude the external factors specified above, they do take into account other risk factors in the bank's operating environment, including the strength and prospective performance of the economy, as well as the structure and relative fragility of the financial system, and the quality of banking regulation and supervision. Global Local Currency Deposit Rating A deposit rating, as an opinion of relative credit risk, incorporates the BFSR as well as Moody's opinion of any

5 external support. Specifically, Moody's Bank Deposit Ratings are opinions of a bank's ability to repay punctually its deposit obligations. As such, they are intended to incorporate those aspects of credit risk relevant to the prospective payment performance of rated banks with respect to deposit obligations, which includes: intrinsic financial strength, sovereign transfer risk (in the case of foreign currency deposit ratings), and both implicit and explicit external support elements. Moody's Bank Deposit Ratings do not take into account the benefit of deposit insurance schemes which make payments to depositors, but they do recognise the potential support from schemes that may provide assistance to banks directly. According to Moody's joint default analysis (JDA) methodology, the global local currency deposit rating of a bank is determined by the incorporation of external elements of support into the bank's baseline credit assessment. In calculating the Global Local Currency Deposit rating for a bank, the JDA methodology also factors in the rating of the support provider, in the form of the local currency deposit ceiling for a country, Moody's assessment of the probability of systemic support for the bank in the event of a stress situation and the degree of dependence between the issuer rating and the Local Currency Deposit Ceiling. National scale rating National scale ratings are intended primarily for use by domestic investors and are not comparable to Moody's globally applicable ratings; rather they address relative credit risk within a given country. A Aaa rating on Moody's National Scale indicates an issuer or issue with the strongest creditworthiness and the lowest likelihood of credit loss relative to other domestic issuers. National Scale Ratings, therefore, rank domestic issuers relative to each other and not relative to absolute default risks. National ratings isolate systemic risks; they do not address loss expectation associated with systemic events that could affect all issuers, even those that receive the highest ratings on the National Scale. Foreign Currency Debt Rating Moody's ratings on foreign currency bank obligations derive from the bank's local currency rating for the same class of obligation. The implementation of JDA for banks can lead to high local currency ratings for certain banks, which could also produce high foreign currency ratings. Nevertheless, it should be noted that foreign currency deposit ratings are in all cases constrained by the country ceiling for foreign currency bank deposits. This may result in the assignment of a different, and typically lower, rating for the foreign currency deposits relative to the bank's rating for local currency obligations. Foreign Currency Debt Rating Foreign currency debt ratings are derived from the bank's local currency debt rating. In a similar way to foreign currency deposit ratings, foreign currency debt ratings may also be constrained by the country ceiling for foreign currency bonds and notes; however, in some cases the ratings on foreign currency debt obligations may be allowed to pierce the foreign currency ceiling. A particular mix of rating factors are taken into consideration in order to assess whether a foreign currency bond rating pierces the country ceiling. They include the issuer's global local currency rating, the foreign currency government bond rating, the country ceiling for bonds and the debt's eligibility to pierce that ceiling. About Moody's Bank Financial Strength Scorecard Moody's bank financial strength model (see scorecard below) is a strategic input in the assessment of the financial strength of a bank, used as a key tool by Moody's analysts to ensure consistency of approach across banks and regions. The model 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. Rating Factors Bausparkasse Mainz AG Rating Factors [1] A B C D E Total Score Trend Qualitative Factors (50%) D+ Factor: Franchise Value D- Neutral Market share and sustainability x

6 Geographical diversification x Earnings stability x Earnings Diversification [2] x Factor: Risk Positioning D+ Neutral Corporate Governance [2] - Ownership and Organizational Complexity - Key Man Risk - Insider and Related-Party Risks Controls and Risk Management x - Risk Management x - Controls x Financial Reporting Transparency x - Global Comparability x - Frequency and Timeliness x - Quality of Financial Information x Credit Risk Concentration x - Borrower Concentration x - Industry Concentration x Liquidity Management x Market Risk Appetite x Factor: Operating Environment B Neutral Economic Stability x Integrity and Corruption x Legal System x Financial Factors (50%) C- Factor: Profitability E+ Weakening PPI % Average RWA (Basel II) 1.04% Net Income % Average RWA (Basel II) 0.03% Factor: Liquidity C Neutral (Market Funds - Liquid Assets) % Total Assets 3.48% Liquidity Management x Factor: Capital Adequacy B+ Neutral Tier 1 Ratio (%) (Basel II) 9.05% Tangible Common Equity % RWA (Basel II) 9.09% Factor: Efficiency D Neutral Cost / Income Ratio 71.71% Factor: Asset Quality C Neutral Problem Loans % Gross Loans 1.93% Problem Loans % (Equity + LLR) 30.80% Lowest Combined Financial Factor Score (15%) D- Economic Insolvency Override Neutral Aggregate BFSR Score D+ Aggregate BCA Score baa3/ba1 Assigned BFSR C- Assigned BCA baa1 [1] - Where dashes are shown for a particular factor (or sub-factor), the score is based on non-public information. [2] - A blank score under Earnings Diversification or Corporate Governance indicates the risk is neutral.

7 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody s Publications.

8 To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY S. To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. MIS, a wholly-owned credit rating agency subsidiary of Moody s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at under the heading "Shareholder Relations Corporate Governance Director and Shareholder Affiliation Policy." For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN AFSL and/or Moody's Analytics Australia Pty Ltd ABN AFSL (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.