FINANCIAL INSTITUTIONS

CREDIT OPINION Landesbank AG 19 December 2019 Update to credit analysis

Update Summary On 23 October, we lowered 's Macro Profile to Strong+ from Very Strong-. As a result of Landesbank Berlin AG's (LBB) clear focus on the domestic market, the bank's Weighted Macro Profile was also lowered to Strong+ from Very Strong-. The bank's Aa2(stable)/P-1 deposit and issuer ratings were unaffected by the change of the Macro RATINGS Profile. Similarly, its baa2 Baseline Credit Assessment (BCA), a3 Adjusted BCA, and A2 junior Landesbank Berlin AG senior unsecured debt rating, as well as its Aa2/P-1 Counterparty Risk Ratings (CRR) remained Domicile Berlin, Germany unaffected. Long Term CRR Aa2 Type LT Counterparty Risk The ratings reflect (1) the bank's baa2 BCA; (2) its a3 Adjusted BCA, based on Very High Rating - Fgn Curr 1 Outlook Not Assigned affiliate support from Sparkassen-Finanzgruppe (S-Group, Aa2 negative, a2 ); (3) the results Long Term Debt Withdrawn of our Advanced Loss Given Failure (LGF) analysis, which provides three notches of rating Type Senior Unsecured - uplift for deposits and issuer ratings; and (4) our assumptions of Moderate support from the Dom Curr 2 Outlook Rating(s) WithDrawn Government of Germany (Aaa stable ) for deposits and issuer ratings, yielding one notch of Long Term Deposit Aa2 rating uplift. Type LT Bank Deposits - Fgn Curr LBB's baa2 BCA is underpinned by the bank's comfortable funding position and strengthened Outlook Stable capitalisation, while it is restrained by a comparatively weaker asset profile, as a result of substantial commercial real estate (CRE) exposures. In addition, LBB's role within Please see the ratings section at the end of this report for more information. The ratings and outlook shown Erwerbsgesellschaft der S-Finanzgruppe mbH & Co. KG (SEG) and, in particular, the weaker reflect information as of the publication date. standalone credit profile of the bank's sister company Berlin Hyp AG (Berlin Hyp, Aa2/Aa2 stable, ba13) constrain LBB's BCA. While direct financial links between LBB and Berlin Hyp are limited, the close links within the group, via profit and loss transfer agreements (PLTA), result Contacts in meaningful risk correlation between the two key subsidiaries of SEG. Goetz Thurm, CFA +49.69.70730.773 VP-Senior Analyst Exhibit 1 [email protected] Rating Scorecard - Key Financial Ratios LBB (BCA: baa2) Median baa2-rated banks Alexander Hendricks, +49.69.70730.779 18% 50% 16% CFA 40% 14% Liquidity Factors Associate Managing Director 12% 30% [email protected] 10% 8% 20% 6% Maryna Harbal +49.69.70730.962 4% 1.9% 10% 2% 16.6% 0.2% 15.1% 43.0%

Associate Analyst FactorsSolvency 0% 0% [email protected] Asset Risk: Capital: Profitability: Funding Structure: Liquid Resources: Problem Loans/ Tangible Common Net Income/ Market Funds/ Liquid Banking Gross Loans Equity/Risk-Weighted Tangible Assets Tangible Banking Assets/Tangible Assets Assets Banking Assets Solvency Factors (LHS) Liquidity Factors (RHS)

Source: Moody's Investors Service MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Credit strengths » Adequate risk-adjusted capitalisation levels, providing a sufficient buffer to regulatory minimum requirements

» Improved asset quality in the currently benign operating environment

» Solid liquidity profile, supported by strong access to customer deposits and significant liquid resources

Credit challenges » Substantial CRE exposures, exposing the bank to tail risks from dislocations in CRE markets

» Geographical concentration in the Berlin-Brandenburg region

» Close contractual links within the SEG group, which constrain LBB's credit profile

Outlook » The outlook on LBB's Aa2 deposit and issuer ratings is stable, reflecting our expectation that (1) the combined credit profile of LBB and Berlin Hyp, as reflected in the consolidated accounts of both banks' ultimate parent SEG, will stay broadly stable over the rating outlook horizon; and (2) the liability structure of SEG will stay stable, which forms the basis for our Advanced LGF analysis, reflecting our assumption of a common resolution perimeter for LBB and Berlin Hyp.

Factors that could lead to an upgrade » An upgrade of LBB's ratings will be subject to an uplift of its baa2 BCA and a3 Adjusted BCA, in combination with an improvement in the overall creditworthiness of S-Group. In addition, an upgrade of the bank's junior senior unsecured debt rating could be driven by an improved result from our Advanced LGF analysis, which takes into account the severity of loss faced by the different liability classes in resolution at the level of SEG.

» Upward pressure on LBB's baa2 BCA could develop as a result of an additional strengthening of the combined credit profile of LBB and Berlin Hyp, as reflected in the consolidated SEG accounts. Furthermore, a revision of the currently applicable profit and loss transfer arrangements, as part of a reorganisation of SEG, and the associated reduction in risk correlations between LBB and Berlin Hyp, could potentially lead to a reassessment of the currently applicable rating constraint, prompting upward pressure on LBB's BCA. However, in such a scenario, we would also have to reassess our assumption of a common resolution perimeter for LBB and Berlin Hyp, which could result in a lower LGF uplift for LBB if we applied a standalone resolution perimeter.

» Upward pressure on the junior senior unsecured debt rating could develop if sufficient amounts of subordinated or junior senior unsecured debt were to be issued by LBB or Berlin Hyp, or both, which would provide an additional buffer or lower the loss severity for junior senior debt at the consolidated level of SEG.

» Deposits and the issuer rating, as well as counterparty liabilities, already benefit from the maximum of three notches of uplift from our Advanced LGF analysis and, hence, can only be upgraded if LBB's Adjusted BCA is upgraded.

Factors that could lead to a downgrade » A downgrade of LBB's ratings will be subject to a lowering of its a3 Adjusted BCA. In addition, changes in SEG's liability structure, resulting in higher loss-given-failure in resolution and therefore fewer notches in rating uplift derived from our Advanced LGF analysis, could negatively affect the ratings.

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 www.moodys.com for the most updated credit rating action information and rating history.

2 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

» Downward pressure on LBB's a3 Adjusted BCA could develop from significant weakening of LBB's and Berlin Hyp's financial fundamentals to the extent that the combined credit strength of SEG was adversely affected, particularly if higher asset risks at both banks depleted the group's capital resources. A mild deterioration in both entities' credit profiles could be offset by additional cross- sector support. Further, lower creditworthiness of S-Group or a lowering of our Very High sector support assumptions, although unlikely, could trigger downward rating pressure.

Key indicators

Exhibit 2 Landesbank Berlin AG (Consolidated Financials) [1]

06-192 12-182 12-172 12-162 12-152 CAGR/Avg.3 Total Assets (EUR Billion) 47.0 43.1 44.8 45.9 47.5 (0.3)4 Total Assets (USD Billion) 53.5 49.2 53.8 48.4 51.6 1.04 Tangible Common Equity (EUR Billion) 2.3 2.3 2.3 2.2 2.1 1.84 Tangible Common Equity (USD Billion) 2.6 2.6 2.7 2.4 2.3 3.24 Problem Loans / Gross Loans (%) -- 1.6 1.7 2.3 2.8 2.15 Tangible Common Equity / Risk Weighted Assets (%) 16.6 16.8 17.8 18.1 17.4 17.36 Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) -- 12.3 12.9 15.8 17.6 14.65 Net Interest Margin (%) 1.7 1.7 1.6 1.6 1.4 1.65 PPI / Average RWA (%) 0.7 1.0 1.3 1.2 0.5 0.96 Net Income / Tangible Assets (%) 0.2 0.1 0.2 0.3 0.0 0.25 Cost / Income Ratio (%) 91.1 87.9 85.3 87.8 94.3 89.35 Market Funds / Tangible Banking Assets (%) 23.4 15.1 18.1 20.8 29.1 21.35 Liquid Banking Assets / Tangible Banking Assets (%) 45.1 43.0 47.4 52.1 56.9 48.95 Gross Loans / Due to Customers (%) -- 78.3 74.6 66.8 64.8 71.15 [1]All figures and ratios are adjusted using Moody's standard adjustments. [2]Basel III - fully-loaded or transitional phase-in; LOCAL GAAP. [3]May include rounding differences due to scale of reported amounts. [4]Compound Annual Growth Rate (%) based on time period presented for the latest accounting regime. [5]Simple average of periods presented for the latest accounting regime. [6]Simple average of Basel III periods presented. Source: Moody's Investors Service; Company Filings

Profile LBB is a German public sector bank that provides retail banking, corporate banking, and real estate financing services in the Berlin- Brandenburg region. In addition to its local mandate, LBB's remit on a national scale encompasses the provision of certain services for S-Group in the areas of consumer finance, auto loans and credit cards. As of June 2019, the bank reported total assets of €47.0 billion and employed 3,196 staff.

LBB and its sister company, CRE lender Berlin Hyp, are set up under SEG umbrella and are closely tied via a PLTA agreement with Landesbank Berlin Holding AG (LBBH), a holding entity, which is fully owned by SEG. LBB is delivering its retail banking, corporate banking, real estate financing services through Berliner Sparkasse, a legal branch of LBB, while other services such as its auto loan and consumer finance businesses being housed within the S-Kreditpartner GmbH (SKP) subsidiary, and the national credit card business and the treasury management are being operated by LBB itself.

Weighted Macro Profile of Strong+ As of year-end 2018, about 82% of LBB's asset base related to the German market, while other European Union countries accounted for a further 13%, and other European countries, the US, and supranational organisations comprised most of the remainder. As a result of the bank's large exposure to its home market, the assigned Weighted Macro Profile of LBB is set at Strong+, in line with the Macro Profile of Germany, which was recently lowered to Strong+ from Very Strong-.

3 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Detailed credit considerations Commercial real estate remains the main driver of asset risk We assign a ba1 Asset Risk score to LBB, six notches below the a1 initial score (which is conditioned by bank's Strong+ Weighted Macro Profile). The assigned score incorporates LBB's geographical concentration and its increasing CRE exposures versus its tangible common equity (TCE). These risks are not adequately reflected in the currently moderate three-year average (2016-2018) problem loans/gross loans ratio of 1.9% (1.6% as of year-end 2018), which has declined substantially in recent years following the bank's restructuring and reflecting the currently benign operating environment.

Exhibit 3 LBB successfully decreased its legacy exposures

Problem Loans / Gross Loans (lext axis) Coverage ratio (right axis) 3.0% 180%

160% 2.5% 140%

2.0% 120%

100% 1.5% 80%

1.0% 60%

40% 0.5% 20%

0.0% 0% 2015 2016 2017 2018 Problem loan ratio as per Moody's definition Source: Company reports, Moody's Investors Service

Following the spin-off of Berlin Hyp4, LBB's exposures related to CRE have declined materially. Yet, CRE exposures remain substantial and are now concentrated in the Berlin-Brandenburg region. As of year-end 2018, CRE-related credit exposures amounted to €12.6 billion, representing 27% of the bank's total exposures at default or 5.6x the bank's TCE, which increased from 4.5x in 2016. In 2018, the bank increased its CRE exposures by €0.7 billion (€1.8 billion in 2017) and we will likely see further growth, given continued strength in the commercial property market in Berlin (Aa1 stable5).

Further asset risk at LBB arises from the bank's securities portfolio, which stood at €9.0 billion (21% of total assets) as of December 2018. LBB has a well-diversified investment portfolio of mostly repo-eligible public sector and private sector bonds, but the size of its treasury book remains substantial. Finally, the bank's lending to small and medium-sized businesses in the Berlin-Brandenburg region, as well as its private customer franchise, is a source of asset risk, with the latter being geographically more diversified, given the national reach of the bank's credit card, auto loan and consumer finance businesses. As of January 2016, LBB no longer runs a trading book with its concomitant market risk.

LBB's problem loans amounted to €348 million as of year-end 2018, a 76% reduction from the €1,427 million reported at the end of 2012, reflecting the successful workout of the bank's legacy CRE exposures. In 2018, LBB built up further €82 million of loan loss provisions (including 340f contingency reserve additions6), which has manifested itself in a strong coverage ratio (loan loss reserves over problem loans), which stood at 162% as of December 2018. In comparison to banks reporting under IFRS, the coverage ratio is somewhat overstated, though, since LBB's undisclosed stock of 340f provisions is included within loan loss reserves.

Capitalisation is adequate in light of limited internal capital generation capacity Our assigned Capital score of aa3, one notch below the aa2 initial score, takes into consideration that LBB does not consolidate its SKP subsidiary in its external accounts7, while regulatory capitalisation is assessed with SKP being fully consolidated, resulting in lower capital adequacy metrics. Moreover, we expect that volume growth in certain business lines, such as CRE, will lead to some softening of capital ratios from current levels again. Finally, we have factored in the bank's hidden 340f reserves under German GAAP, which provide additional loss-absorbing capacity.

4 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

For regulatory purposes, capitalisation requirements are assessed by the European Central Bank (ECB) under the Single Supervisory Mechanism (SSM) at the level of LBB's ultimate parent company, SEG, which reported a transitional 13.4% Tier 1 ratio and a 15.0% total capital ratio as of June 2019 (13.1% and 14.8% as of year-end 2018 respectively). These metrics included SKP, as well as LBB and Berlin Hyp, on a consolidated basis. Conversely and as outlined above, LBB's Common Equity Tier 1 (CET1) capital ratio of 16.3% as of June 2019 (16.8% as of year-end 2018) and our TCE ratio (TCE over risk-weighted assets) of 16.6% as of June 2019 (16.9% as of year-end 2018) did not include the consolidated SKP subsidiary. LBB's leverage ratio (TCE over tangible assets) of 4.9% as of June 2019 (5.3% as of year-end 2018) would also have been somewhat lower if SKP were consolidated.

Exhibit 4 LBB's capital ratios decreased, but still substantially above capital requirements

TCE ratio CET1 ratio TCE leverage 20% 17.8% 17.4% 18% 16.9% 16.8% 16.6% 16.3% 16% 14% 12% 10% 8% 5.3% 6% 5.1% 4.9% 4% 2% 0% 2017 2018 H1 2019 TCE = Tangible common equity (Moody's calculation), CET1 = Common Equity Tier 1. Source: Company reports, Moody's Investors Service

During the first six months of 2019, capitalisation softened somewhat, mainly reflecting a temporary €0.8 billion increase in interbank lending, with LBB taking advantage of carry opportunities in the market (interbank liabilities increased by €2.9 billion), as well as a €1.0 billion increase in CRE lending and business with private customers. The interbank positions are expected to be reigned in again by year-end 2019. Hence, we still regard LBB's capitalisation as adequate at present, and we note that over a longer-term horizon, capitalisation has markedly improved from the 14.1% Tier 1 ratio reported as of year-end 2012, driven by the resizing of the bank's profile to that of a savings bank. With changes to the Basel framework being phased-in from 2022 and consequent decrease of the capital ratios, we expected LBB to further bolster its capital base in the years to come, as the bank will be affected by the introduction of output floors, since it applies the internal ratings based approach (IRBA) to derive risk-weights for the bulk of its assets. On account of LBB's profit and loss sharing agreement with LBBH, the only option for the bank to retain earnings, though, is through the build-up of reserves for general banking risks (called 340g under German GAAP) or through the creation of the aforementioned hidden reserves (called 340f). This arrangement might limit profit retention to a certain extent.

Profitability has improved following the right-sizing into a savings bank For the Profitability score, we assign a ba3, one notch above the b1 initial score, which is derived from the 0.2% return on assets (adjusted net income over tangible assets) in the first six months of 2019. For our assigned score, we exclude the bank's 340f reserve build-up/release.

Since LBB operates under a profit and loss transfer agreement, it does not have to pay any taxes on its domestic income, but has to upstream its entire net profit to its parent LBBH, where domestic taxes are paid, utilising remaining tax loss carryforwards generated by the former Bankgesellschaft Berlin. As a result of this setup, the reported net profit of LBB is zero. Hence, in order to gauge the underlying earnings power of the bank, we assume a normalized tax rate of 30% that we apply to the Moody's-adjusted pre-tax income, which resulted in an adjusted net profit of €44 million and €58 million in 2018 and the first half of 2019, respectively, which represented an adjusted return on assets of 0.1% and 0.2% in those periods. Not reflected in these metrics was the strengthening of the bank's 340f reserve, which understated our adjusted earnings.

5 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Exhibit 5 LBB's earnings improved after the reorganization

Net interest Income Net fees and commissions income Trading & other income Operating Expenses Risk provisions Extraordinary income and expense Pre-tax profit

1,500

361 255 1,000 221 130 113 244 234 282 271 233

500 721 715 733 704 752

0 € million -917 -500 -1,045 -1,099 -1,000 -988

-1,000

-1,500 2015 2016 2017 2018 2019E Source: Company reports, Moody's Financial Metrics, Moody's estimation

Both adjusted and underlying earnings, excluding the 340f reserve build-up, improved in 2018 and first half of 2019, and we expect that profitability has sustainably advanced from the very weak levels reported in the years prior to 2016, when LBB was transforming and right-sizing itself into a savings bank. In 2018, LBB's net interest income, which represented 66% of the bank's adjusted revenues, increased by 5.2% or €37 million year-on-year to €752 million. However, the bank's fee and commission income decreased slightly by €11 million, which resulted in €271 million on the back of increased fee and commission expenses caused by higher credit volume. Loan loss provisioning requirements (excluding the 340f reserve build-up) remained modest, while the cost base increased, mainly due to the change in the discount rate for pension obligations.

During the first half of 2019, net interest income decreased by 8% year-on-year to €366 million, as a consequence of lower income from the treasury business. On the other side, increased income from real estate business and participations supported the result. Commission income likewise decreased by 21% to €117 million mainly due to less fees from the credit cards business. The deterioration in revenues was further driven by a higher cost base, reflecting a lower discount rate in the calculation of pension obligations. These negative developments were offset by lower loan loss provisions (excluding the 340f reserve build up of €52 million in 1H19 and €48 million in 1H18) and by higher other operating income. As a result, the adjusted pre-tax income increased by 32% year-on-year to €83 million, which translated into a return on assets of 0.2%.

Strong deposit franchise with limited need for additional market funding Our assigned a3 Funding Structure, in line with the initial score, reflects our assumption that LBB's market funds ratio will stay around 20% in the medium term, owing to the bank's strong deposit franchise and thus limited need for additional market funding. However, as of June 2019, the market funds ratio temporarily jumped to 23.4% from 15.1% six months earlier, as the bank ratcheted up its interbank funding to take advantage of the carry opportunities mentioned above. By year-end 2019, we should see the market funds ratio decline again.

6 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Exhibit 6 LBB decreased its dependence on market funds Composition of market funding sources

Equity Other liabilities Issued securities Interbank Deposits Market Funds Ratio* (right axis)

100% 30%

90% 29% 80% 25% 70% 23% 60% 21% 50% 20% 18% 40% 30% 15% 20% 15% 10% 0% 10% 2015 2016 2017 2018 H1 2019

*Market funds ratio = market funds/tangible banking assets. Source: Company reports, Moody's Investors Service

In general, LBB's funding profile has improved materially over the last few years, as the bank transformed itself into a savings bank and focused on its deposit-gathering franchise. Customer deposits, most of them being retail deposits, amounted to €29 billion as of June 2019 and now fund around 63% of the bank's balance sheet, which results in a sizeable deposit overhang, given net customer loans of €23 billion (loan/deposit ratio of 78%). In addition to its stable retail deposit base, the bank has access to market funding from the savings bank sector and the wider interbank market, as well as from Pfandbriefe (covered bonds), junior senior unsecured bonds and promissory note loans.

Very strong liquidity buffer despite asset encumbrance Our view of LBB's a1 assigned Liquid Resources score, one notch below the aa3 initial score, takes into account the bank's cash position, interbank loans and still sizeable securities portfolio, adjusted for encumbered assets and lending to related entities. We also take into account that we expect the bank to decrease the current extremely comfortable liquidity buffer to manage leverage and to allow for renewed growth in customer lending.

Exhibit 7 LBB's levels of liquidity declined, but still remain strong Composition of liquid assets

Cash Interbank Securities/Investments Loans Other assets Liquid Banking Asset Ratio (right axis) 100% 60%

90% 57% 80% 55% 52% 70%

60% 50% 47% 50% 45% 40% 43% 45% 30%

20% 40%

10%

0% 35% 2015 2016 2017 2018 H1 2019

*Liquid banking assets ratio = liquid assets/tangible banking assets. Source: Company reports, Moody's Investors Service

LBB's liquid banking assets ratio (liquid banking assets to tangible assets) stood at 43.0% as of December 2018 and rose to 45.0% at the June 2019 stage. The bank's Liquidity Coverage Ratio (LCR) reached 233% as of June 2019, a slight improvement from the 181%

7 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

as of December 2018. While the bank does not yet publish a Net Stable Funding Ratio (NSFR), its own, very similar internal measure remained above 100% throughout 2018 and the first half of 2019, highlighting the bank's solid liquidity position.

LBB's credit profile is restrained by the close contractual links within the SEG group Based on our analysis of LBB's Financial Profile, the unconstrained outcome of our Scorecard is baa1. However, the assigned baa2 BCA of LBB is constrained by one notch by the somewhat weaker credit profile of the bank's sister company, Berlin Hyp. Following the reorganisation of LBB, the direct financial links between the two banks are very limited. Nonetheless, we believe that the close links within the group, illustrated by the aforementioned profit and loss transfer agreements, result in meaningful risk correlation between the two key subsidiaries of SEG. This correlation affects their probability of default, as captured in our BCA. Environmental, social and governance (ESG) considerations In line with our general view on the banking sector, LBB has a low exposure to environmental risks (see our environmental risk heatmap8 for further information).

For social risks, we also place LBB in line with our general view for the banking sector, which indicates a moderate exposure (see our social risk heatmap9).

Corporate Governance10is highly relevant for LBB, as it is to all players in the banking industry. Corporate governance weaknesses can lead to a deterioration in a company’s credit quality, while governance strengths can benefit its credit profile. Governance risks are largely internal rather than externally driven, and for LBB we do not have any particular governance concern. Nonetheless, corporate governance remains a key credit consideration and requires ongoing monitoring. Detailed credit considerations Affiliate support LBB benefits from cross-sector support from S-Group. Cross-sector support materially reduces the probability of default, as it would be available to stabilise a distressed member bank, and not just compensate for losses in resolution.

We continue to consider the readiness of the sector to support its core members to be Very High. This particularly applies to LBB, given its 100% indirect ownership by the sector's savings banks. Cross-sector support provides two notches of rating uplift from the bank's baa2 BCA, resulting in an a3 Adjusted BCA.

Loss Given Failure analysis LBB is subject to the EU Bank Recovery and Resolution Directive (BRRD), which we consider to be an operational resolution regime. We, therefore, apply our Advanced LGF analysis, where we consider the risks faced by the different debt and deposit classes across the liability structure should the bank enter resolution (the analysis is performed at the level of SEG, the consolidating entity of the group's key subsidiaries LBB and Berlin Hyp).

Our Advanced LGF analysis follows the revised insolvency legislation in Germany that became effective on 21 July 2018. Following the change in law, the legal hierarchy of bank claims in Germany is now consistent with most other European Union (EU) countries, where statutes do not provide full preference to deposits over senior unsecured debt. However, in our Advanced LGF analysis we now consider not only the results of both the formal legal position (pari passu, or 'de jure' scenario), to which we assign a 75% probability, but also an alternative liability ranking, reflecting resolution authority discretion to prefer deposits over senior unsecured debt (full depositor preference, or 'de facto' scenario), to which we assign a 25% probability.

We further assume residual tangible common equity of 3% and losses post-failure of 8% of tangible banking assets, a 25% run-off in “junior” wholesale deposits and a 5% run-off in preferred deposits. These ratios are in line with our standard assumptions. In addition, we assume that only a very small percentage (10%) of the deposit base can actually be considered junior and qualify as bail-in-able under the BRRD.

The results of our Advanced LGF analysis are:

8 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

» For deposits and senior unsecured debt (the anchor for LBB's issuer rating), as well as CRR liabilities, our LGF analysis indicates an extremely low loss-given-failure, leading us to position their Provisional Rating Assessments at aa3, three notches above the a3 Adjusted BCA.

» For junior senior unsecured debt, our LGF analysis indicates a low loss-given-failure, leading us to position its Provisional Rating Assessment at a2, one notch above the a3 Adjusted BCA.

» For subordinated debt, our LGF analysis indicates a high loss-given-failure, leading us to position its Provisional Rating Assessment at baa1, one notch below the a3 Adjusted BCA.

Government support considerations Following the introduction of the BRRD, we have lowered our expectations about the degree of support the government might provide to a bank in Germany in the event of need. Owing to its size on a consolidated basis, we consider S-Group as systemically relevant and, therefore, attribute a Moderate probability of German government support for all members of the sector, in line with support assumptions for other systemically relevant banking groups in . We, therefore, still include one notch of government support uplift in our CRRs, senior unsecured debt and deposit ratings of S-Group member banks that are incorporated in Germany, including LBB. For junior securities, we continue to believe that the likelihood for government support is Low and these ratings do not include any related uplift.

In particular for junior senior unsecured debt, the legal change to the German banks’ insolvency rank order has lowered the likelihood of government support being available for these instruments, because legally they rank pari passu with the majority of outstanding (statutorily subordinated) senior unsecured instruments issued up until 20 July 2018. This pari passu ranking of new junior senior unsecured debt with legacy (statutorily subordinated) senior unsecured instruments makes it less likely that German authorities would selectively support the legacy instruments (which we reclassified into junior senior unsecured debt), following clarification that the German authorities expect these liabilities to bear losses in a resolution. As a result, we have reduced our government support assumption for these instruments to Low from Moderate.

Counterparty Risk Ratings Counterparty Risk Ratings (CRR) are opinions of the ability of entities to honour the uncollateralised portion of non-debt counterparty financial liabilities (CRR liabilities) and also reflect the expected financial losses in the event such liabilities are not honoured. CRR are distinct from ratings assigned to senior unsecured debt instruments and from issuer ratings because they reflect that, in a resolution, CRR liabilities might benefit from preferential treatment compared with senior unsecured debt. Examples of CRR liabilities include the uncollateralised portion of payables arising from derivatives transactions and the uncollateralised portion of liabilities under sale and repurchase agreements.

LBB's CRR are positioned at Aa2/P-1 The CRR, prior to government support, are positioned three notches above the Adjusted BCA of a3, reflecting the extremely low loss- given-failure from the high volume of instruments, primarily junior senior unsecured debt, that are subordinated to CRR liabilities in our Advanced LGF analysis. LBB's CRR also benefit from one notch of rating uplift provided by government support, in line with our Moderate support assumption on deposits and senior unsecured debt.

Counterparty Risk Assessment The Counterparty Risk Assessment (CR Assessment) is an opinion of how counterparty obligations are likely to be treated if a bank fails and is distinct from debt and deposit ratings in that it (1) considers only the risk of default rather than both the likelihood of default and the expected financial loss suffered in the event of default; and (2) applies to counterparty obligations and contractual commitments rather than debt or deposit instruments. The CR Assessment is an opinion of the counterparty risk related to a bank's covered bonds, contractual performance obligations (servicing), derivatives (e.g., swaps), letters of credit, guarantees and liquidity facilities.

LBB's CR Assessment is positioned at Aa2(cr)/P-1(cr) The bank's CR Assessment is positioned four notches above the a3 Adjusted BCA, incorporating 1) three notches of LGF-uplift derived from the buffer against default provided by more subordinated instruments, primarily junior senior unsecured debt, to the senior obligations represented by the CR Assessment; and 2) one notch of government support uplift, assuming a Moderate level of support.

9 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

To determine the CR Assessment, we focus purely on subordination in our Advanced LGF analysis, taking no account of the volume of the instrument class. Methodology and scorecard Methodology The principal methodology we used in rating LBB was Banks Methodology, published in November 2019.

About Moody's Bank Scorecard Our Bank Scorecard is designed to capture, express and explain in summary form our Rating Committee's judgment. When read in conjunction with our research, a fulsome presentation of our judgment 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.

10 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Rating methodology and scorecard factors

Exhibit 8 Landesbank Berlin AG Macro Factors Weighted Macro Profile Strong + 100%

Factor Historic Initial Expected Assigned Score Key driver #1 Key driver #2 Ratio Score Trend Solvency Asset Risk Problem Loans / Gross Loans 1.9% a1 ←→ ba1 Sector concentration Geographical concentration Capital Tangible Common Equity / Risk Weighted Assets 16.6% aa2 ←→ aa3 Expected trend Risk-weighted (Basel III - transitional phase-in) capitalisation Profitability Net Income / Tangible Assets 0.2% b1 ←→ ba3 Earnings quality Expected trend Combined Solvency Score a2 baa2 Liquidity Funding Structure Market Funds / Tangible Banking Assets 15.1% a3 ←→ a3 Extent of market Expected trend funding reliance Liquid Resources Liquid Banking Assets / Tangible Banking Assets 43.0% aa3 ←→ a1 Asset encumbrance Expected trend Combined Liquidity Score a2 a2 Financial Profile baa1 Qualitative Adjustments Adjustment Business Diversification 0 Opacity and Complexity 0 Corporate Behavior 0 Total Qualitative Adjustments 0 Sovereign or Affiliate constraint Baa2 BCA Scorecard-indicated Outcome - Range baa1 - baa3 Assigned BCA baa2 Affiliate Support notching 2 Adjusted BCA a3

Debt Class De Jure waterfall De Facto waterfall Notching LGF Assigned AdditionalPreliminary Instrument Sub- Instrument Sub- De Jure De Facto Notching LGF Notching Rating volume + ordination volume + ordination Guidance notching Assessment subordination subordination vs. Adjusted BCA Counterparty Risk Rating ------3 0 aa3 Counterparty Risk Assessment ------3 0 aa3 (cr) Deposits ------3 0 aa3 Junior senior unsecured bank debt ------1 0 a2 Dated subordinated bank debt ------1 0 baa1

11 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Instrument Class Loss Given Additional Preliminary Rating Government Local Currency Foreign Failure notching notching Assessment Support notching Rating Currency Rating Counterparty Risk Rating 3 0 aa3 1 Aa2 Aa2 Counterparty Risk Assessment 3 0 aa3 (cr) 1 Aa2(cr) Deposits 3 0 aa3 1 Aa2 Aa2 Junior senior unsecured bank debt 1 0 a2 0 A2 Dated subordinated bank debt -1 0 baa1 0 Baa1 [1]Where dashes are shown for a particular factor (or sub-factor), the score is based on non-public information. Source: Moody’s Investors Service

Ratings

Exhibit 9 Category Moody's Rating LANDESBANK BERLIN AG Outlook Stable Counterparty Risk Rating Aa2/P-1 Bank Deposits Aa2/P-1 Baseline Credit Assessment baa2 Adjusted Baseline Credit Assessment a3 Counterparty Risk Assessment Aa2(cr)/P-1(cr) Issuer Rating Aa2 Junior Senior Unsecured -Dom Curr A2 Subordinate -Dom Curr Baa1 BERLINER SPARKASSE Outlook Stable Counterparty Risk Rating Aa2/P-1 Bank Deposits Aa2/P-1 Counterparty Risk Assessment Aa2(cr)/P-1(cr) Issuer Rating -Dom Curr Aa2 LBB FINANCE (IRELAND) PLC Outlook Stable Bkd Subordinate -Dom Curr Aa1 Source: Moody's Investors Service

12 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Endnotes 1 The ratings shown are S-Group's corporate family rating and outlook, and its BCA. 2 The rating shown is the Government of Germany's issuer rating and outlook 3 The ratings shown are Berlin Hyp's long-term deposit rating / senior unsecured rating and outlook, and its BCA. 4 In December 2012, the German Savings Banks Association (the umbrella organisation of S-Group) announced its intention to transform LBB from a universal German Landesbank into a savings bank focused on retail banking in Berlin. To facilitate the realignment of activities, LBB's customer-oriented capital market activities, including the asset management company LBB-INVEST, were transferred to DekaBank Deutsche Girozentrale (Deka, Aa2 stable/ Aa2 stable, baa2) as of January 2014. Moreover, LBB's international and national CRE activities outside of Berlin were concentrated in the bank's subsidiary Berlin Hyp, while LBB remained responsible for most local CRE lending in the Berlin-Brandenburg region. Berlin Hyp was then spun off and set up as a sister company of LBB, under the SEG umbrella, as of January 2015, with both LBB and Berlin Hyp remaining closely tied via a profit and loss transfer agreement with Landesbank Berlin Holding AG (LBBH), a holding entity, which is fully owned by SEG. Finally, the bank changed its market presence from LBB to Berliner Sparkasse as of January 2014, with the exception of its treasury management, the national credit card business, and its auto loan and consumer finance businesses, which are housed within the S-Kreditpartner GmbH (SKP) subsidiary. The commercial and legal status of LBB remained unaffected by this rebranding exercise, with Berliner Sparkasse being set up as a legal branch of LBB. As of autumn 2016, LBB had completed the bulk of its realignment projects. 5 The rating shown is the Land of Berlin's issuer rating and outlook. 6 The fully taxed 340f reserve under German GAAP enables companies to smooth their earnings over the cycle. For banks, it is created by booking provisions on loans and securities in excess of what is economically required, thereby understating reported profitability. Conversely, the release of 340f provisions overstates profitability. In the first half of 2019, LBB created a further €52 million in 340f provisions, while the amount of 340f additions for the full year 2018 was not disclosed (€48 million were built-up in the first half). The stock of 340f reserves is likewise not disclosed. 7 LBB holds 66.67% of S-Kreditpartner GmbH (SKP), a joint venture with Deutsche Sparkassen Leasing AG & Co. KG, which provides a service platform to German savings banks to supply car and consumer loans. As SKP is considered an atypical subsidiary under German GAAP (HGB), which cannot be dominated by LBB, it is accounted for at equity within LBB’s accounts and within its regulatory capital ratios. To reach domination and thus full consolidation, a 75% shareholding would be required. SKP is, however, fully consolidated within the regulatory capital ratios of LBB's ultimate parent SEG. 8 Environmental risks can be defined as environmental hazards encompassing the impacts of air pollution, soil/water pollution, water shortages and natural and man-made hazards (physical risks). Additionally, regulatory or policy risks, like the impact of carbon regulation or other regulatory restrictions, including the related transition risks like policy, legal, technology and market shifts, that could impair the evaluation of assets are an important factor. Certain banks could face a higher risk from concentrated lending to individual sectors or operations exposed to the aforementioned risks. 9 Social risk considerations represent a broad spectrum, including customer relations, human capital, demographic and societal trends, health and safety and responsible production. The most relevant social risks for banks arise from the way they interact with their customers. Social risks are particularly high in the area of data security and customer privacy, which is partly mitigated by sizeable technology investments and banks’ long track record of handling sensitive client data. Fines and reputational damage because of product mis-selling or other types of misconduct is a further social risk. Societal trends are also relevant in a number of areas, such as shifting customer preferences toward digital banking services increasing information technology costs, ageing population concerns in several countries affecting demand for financial services or socially driven policy agendas that may translate into regulations that affect banks’ revenue bases. 10Corporate governance is a well-established key driver for banks and related risks are typically included in our evaluation of the banks' financial profile. Further factors like specific corporate behaviour, key person risk, insider and related-party risk, strategy and management risk factors and dividend policy may be captured in individual adjustments to the BCA.

13 19 December 2019 Landesbank Berlin AG: Update to credit analysis MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

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14 19 December 2019 Landesbank Berlin AG: Update to credit analysis