Bayerische Landesbank

FINANCIAL INSTITUTIONS

CREDIT OPINION8 June 2021

Update

RATINGS

Bayerische LandesbankDomicile Munich, Germany

Long Term CRR Aa3

Type LT Counterparty RiskRating - Fgn Curr

Outlook Not Assigned

Long Term Debt Aa3

Type Senior Unsecured - FgnCurr

Outlook Stable

Long Term Deposit Aa3

Type LT Bank Deposits - FgnCurr

Outlook Stable

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Bernhard Held, CFA +49.69.70730.973VP-Sr Credit [email protected]

Alexander Hendricks,CFA

+49.69.70730.779

Associate Managing [email protected]

» Contacts continued on last page

CLIENT SERVICES

Americas 1-212-553-1653

Asia Pacific 852-3551-3077

Japan 81-3-5408-4100

EMEA 44-20-7772-5454

Bayerische LandesbankUpdate to credit analysis

SummaryWe assign Aa3(stable) deposit and senior unsecured debt ratings to Bayerische Landesbank(BayernLB), as well as A2 junior senior unsecured debt and Baa2 subordinate debt ratings.Further, we assign a baa2 Baseline Credit Assessment (BCA) and a baa1 Adjusted BCA.

BayernLB's Aa3 deposit and senior unsecured ratings reflect the bank's baa2 BCA, a one-notch rating uplift from its membership in the institutional protection scheme of Sparkassen-Finanzgruppe (S-Finanzgruppe, Aa2 negative, a21), the application of our Advanced LossGiven Failure (LGF) analysis to its liabilities, which results in an extremely low loss givenfailure and one notch for government support, given its membership in the systemicallyrelevant S-Finanzgruppe.

BayernLB's baa2 BCA reflects the bank's sound asset quality and risk-weighted capitalratios, as well as its ability to mitigate its partial dependence on wholesale market fundingthrough access to readily available and additional liquid resources. BayernLB's BCA remainsconstrained by the bank's concentrated exposures to the commercial real estate (CRE) andrenewable energy sectors and by the low profitability of the bank's operations, excluding itscore subsidiary, Deutsche Kreditbank AG (DKB, A1/A1 stable, baa2)2. Furthermore, the bank'slow level of nominal leverage continues to weigh on its overall financial profile. Our view ofthe bank's BCA could change if the current economic downturn leads to a sustained erosionof BayernLB's solvency strengths.

Exhibit 1

Rating Scorecard - Key financial ratios

1.1%17.3% 0.2% 53.7% 36.6%

0%

6%

12%

18%

24%

30%

36%

42%

48%

54%

60%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Asset Risk:Problem Loans/

Gross Loans

Capital:Tangible Common

Equity/Risk-WeightedAssets

Profitability:Net Income/

Tangible Assets

Funding Structure:Market Funds/

Tangible BankingAssets

Liquid Resources:Liquid Banking

Assets/TangibleBanking Assets

Solvency Factors (LHS) Liquidity Factors (RHS)

BayernLB (BCA: baa2) Median baa2-rated banks

So

lve

ncy F

acto

rs

Liq

uid

ity F

acto

rs

Source: Moody's Financial Metrics

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1280567

https://www.moodys.com/credit-ratings/Bayerische-Landesbank-credit-rating-96010

https://www.moodys.com/credit-ratings/Sparkassen-Finanzgruppe-credit-rating-806929216

https://www.moodys.com/credit-ratings/Sparkassen-Finanzgruppe-credit-rating-806929216

https://www.moodys.com/credit-ratings/Deutsche-Kreditbank-AG-credit-rating-809966801

MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Credit strengths

» Sound asset quality

» Sustainable high risk-weighted capitalisation

» Sound liquidity to balance its dependence on market funding

Credit challenges

» High sector concentrations related to CRE and utilities

» Profitability challenged by low interest rates and cost pressures

» Partial dependence on wholesale funding

OutlookThe outlook on the bank's ratings is stable and reflects our expectation that BayernLB's financial profile, particularly its overall solvency,will remain resilient and that the liability structure of the bank, which forms the basis for our Advanced LGF analysis, will benefit froma decline in tangible banking assets following the repayment of temporary drawings under the ECB's targeted longer-term refinancingoperations.

Factors that could lead to an upgrade

» An upgrade of BayernLB's ratings would be likely in the event of an upgrade of the bank's BCA. BayernLB's junior senior unsecuredand lower-ranking liabilities could also face upward rating pressure if the volume of the bank's subordinated instruments increasessignificantly compared with its tangible banking assets, which could result in an additional uplift from our Advanced LGF analysis.The bank’s deposit and senior unsecured ratings already benefit from the maximum possible rating uplift from our Advanced LGFanalysis.

» An upgrade of BayernLB's baa2 BCA could result from a combination of a significant reduction in the bank's concentration risk(specifically with regard to its CRE exposures), a significant and sustained improvement in its capitalisation and a sustainable andsizeable improvement in groupwide profitability.

Factors that could lead to a downgrade

» A downgrade of BayernLB's ratings could be triggered following a joint weakening of BayernLB's and S-Finanzgruppe'screditworthiness, a lowering of our cross-sector support assumptions or a reduction in the rating uplift as a result of our AdvancedLGF analysis, in particular if the bank fails to restore the levels of volume and subordination its junior senior unsecured debt tranchebenefitted from before the coronavirus outbreak.

» Downward pressure on the bank's BCA could occur because of a deterioration in the bank's combined solvency, especially if itresults from an unexpected and sustained weakening in its capital adequacy metrics.

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

2 8 June 2021 Bayerische Landesbank: Update to credit analysis


Key indicators

Exhibit 2

Bayerische Landesbank (Consolidated Financials) [1]

12-202 12-192 12-182 12-172 12-162 CAGR/Avg.3

Total Assets (EUR Billion) 246.9 220.3 215.7 209.8 204.9 4.84

Total Assets (USD Billion) 302.1 247.3 246.6 251.9 216.2 8.74

Tangible Common Equity (EUR Billion) 11.2 11.3 11.1 10.3 10.5 1.74

Tangible Common Equity (USD Billion) 13.8 12.7 12.7 12.4 11.1 5.64

Problem Loans / Gross Loans (%) 1.0 1.1 1.3 2.6 2.7 1.75

Tangible Common Equity / Risk Weighted Assets (%) 17.3 17.5 16.9 16.8 16.1 16.96

Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) 11.8 13.4 15.0 30.8 30.4 20.35

Net Interest Margin (%) 0.8 0.8 0.8 0.8 0.7 0.85

PPI / Average RWA (%) 1.0 0.9 1.1 1.1 0.9 1.06

Net Income / Tangible Assets (%) 0.2 0.2 0.3 0.3 0.2 0.25

Cost / Income Ratio (%) 71.5 73.0 68.7 69.3 70.3 70.55

Market Funds / Tangible Banking Assets (%) 53.7 50.7 50.2 48.4 44.2 49.45

Liquid Banking Assets / Tangible Banking Assets (%) 36.6 30.9 32.4 32.1 30.0 32.45

Gross Loans / Due to Customers (%) 180.2 195.7 185.9 176.8 155.3 178.85

[1] All figures and ratios are adjusted using Moody's standard adjustments. [2] Basel III - fully loaded or transitional phase-in; IFRS. [3] May include rounding differences because of thescale of reported amounts. [4] Compound annual growth rate (%) based on the periods for the latest accounting regime. [5] Simple average of periods for the latest accounting regime. [6]Simple average of Basel III periods.Sources: Moody's Investors Service and company filings

ProfileBayerische Landesbank (BayernLB) is a German universal bank, 75% owned by the Free State of Bavaria (Bavaria, Aaa stable)3 and 25%owned by the Association of Bavarian Savings Banks, offering financial products and services to retail customers, medium-sized andlarge corporate clients and real estate customers. BayernLB fully consolidates DKB, a commercial bank that conducts public-sector,corporate and online retail operations, and Bayerische Landesbodenkreditanstalt (BayernLabo, Aaa/Aaa stable4), a Bavarian regionaldevelopment bank. Please refer to the latest Credit Opinions5 of these subsidiaries for a discussion of their particular profiles and creditdrivers.

BayernLB focuses on three main segments: DKB, Real Estate & Savings Banks/Financial Institutions and Corporates & Markets. DKBserves as a tech bank and partner on sustainability topics for BayernLB's customers. Real Estate & Savings Banks/Financial Institutionsprovides real estate lending, functions as central bank to the Bavarian savings banks and is a partner to public sector and financialinstitutions. Corporates & Markets provides support in structured asset finance, corporate lending and select capital markets productsmainly to companies from the energy, mobility, technology, manufacturing and engineering and construction and basic resourcesindustries.

BayernLB provides its services from its head office in Munich, through international branches in New York, London, Milan and Paris, aswell as domestic offices in Düsseldorf, Berlin, Frankfurt, Hamburg, Stuttgart and Leipzig, and through its branch office in Nuremberg. Asof 31 December 2020, BayernLB had 8,532 employees.

BayernLB reported consolidated assets of €256 billion6 as of 31 December 2020 and is a member of S-Finanzgruppe. For moreinformation, please see BayernLB's Issuer profile and our German Banking System Profile.

Weighted Macro Profile of Strong (+)BayernLB's lending business has a strong domestic focus, with 83% of its gross lending volume located in Germany as of 31 December2020. Most exposures outside Germany are in Europe (11% of total gross lending volume) and North America (4%). Hence the bank'sMacro Profile is aligned with Germany's Macro Profile.


https://www.moodys.com/credit-ratings/Bavaria-Free-State-of-credit-rating-2142

https://www.moodys.com/credit-ratings/Bayerische-Landesbodenkreditanstalt-credit-rating-825104601

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1246959

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1244501



Recent developmentsAll G-20 countries sustained severe output losses in 2020, but the contraction in some economies is sharper than in others. Weexpect the pace of improvement to be asymmetric across countries. The recovery path is beset by uncertainty and will remain highlydependent on the development and distribution of vaccines, effective pandemic management and government policy support.

The European Central Bank (ECB) introduced a series of measures to help European Union (EU) economies weather the wideningeffects of the pandemic, temporarily increasing banks’ liquidity provisions and lowering regulatory capital and liquidity requirements. Aspart of these temporary measures, the ECB increased its targeted longer-term refinancing operations (TLTRO III) under more favourableterms, as well as its financial asset purchase programme, while refraining from lowering the ultralow interest rates. The temporarysuspension of buffer requirements for regulatory capital and the liquidity coverage ratio (LCR) gives banks greater flexibility andadditional leeway to absorb coronavirus-induced economic strains, such as asset-quality declines. Overall, the package aims to helpbanks continue to finance companies and small and medium-sized enterprises (SMEs) suffering from the effects of the pandemic. TheECB’s measures will provide limited relief for banks and their borrowers, and it will require continued significant fiscal policy measuresby the EU and its member states to avert higher default rates in banks’ lending books.

The Government of Germany (Aaa stable) launched a large stimulus package, and its support has been crucial for corporate borrowersin industries immediately hurt by the pandemic, such as the airlines, tourism, retail and shipping sectors, as well as smaller companiesexperiencing weak liquidity and high leverage. The scale of the support package is unprecedented and is far larger than the supportprovided during the 2008-09 financial crisis. At the same time, the government made it easier to access its furlough scheme andextended it to a broader pool of workers, which will limit the spike in unemployment and the fall in domestic consumption. Themeasures, which are adapted to the evolution of the economic effects of the pandemic, add to Germany's already expansionary fiscalpolicy stance, as well as to the automatic stabilisers that support household incomes when unemployment increases.

On 14 May, BayernLB reported updated financials for first quarter 2021. The bank's reported total assets increased by €30 billion duringthe quarter to €286 billion, partly as a result of an additional drawing under the ECB's TLTRO III programme, which drove up liabilitiesto banks by €17 billion.

At the same time, risk-weighted assets (RWA) increased only by €0.8 billion since year-end 2020 to €65.8 billion as of 31 March.BayernLB's regulatory Common Equity Tier 1 (CET1) ratio declined to a still strong 15.4% from 15.9% as of December 2020, whichremains safely above the CET1 SREP requirement of 9.5%.

A net release of loan loss provisions of €32 million during Q1 (Q1 2020: €72 million of loan loss provisions) points to an overall still lowproblem loan ratio. Besides the significant swing in loan loss provisioning, BayernLB's reported €112 million net result for Q1 (minus€152 million in Q1 2020) was also supported by a marked improvement in pre-provision income. Net interest income improved by€50 million to €476 million, reflecting the supportive effect of low cost funding sourced through the ECB's TLTRO III. At the same time,higher market interest rate levels as of 31 March supported the bank's fair value result of €85 million (Q1 2020: minus €65 million,which reflected wider credit spreads). Stronger revenue further benefitted from an improved net fee result of €94 million (Q1 2020: €71million).

Except for the marked increase in regulatory costs of €144 million (Q1 2020: €115 million) which the bank front-loaded as in prior yearsinto Q1, operating costs grew only moderately year-over-year.

For 2021, BayernLB's management expects to report a pretax result above the €195 million reported for 2020, within a range ofbetween €200 million and €400 million, of which the bank already achieved €164 million during Q1 2021.

Detailed credit considerationsBayernLB's asset quality is sound, but concentrated sector exposures make it vulnerable to the weak economicenvironmentWe assign an Asset Risk score of baa1 to BayernLB, four notches below the aa3 initial score, which takes into consideration the risksthat are not captured by the bank's problem loan ratios — particularly sector concentration risks and market risks — for which weapply negative adjustments. We believe the bank's corporate lending book includes a moderate degree of vulnerabilities to the risks


https://www.moodys.com/credit-ratings/Germany-Government-of-credit-rating-333700/summary


originating from the coronavirus pandemic and we expect higher levels of problem loans over the course of 2021, when governmentsupport measures are reduced from the elevated levels of 2020.

BayernLB's main corporate sector concentration as of year-end 2020 was to the utilities sector, with an exposure of €25.6 billion. Ofthis, 62% related to granular exposures to the renewable energy sector, granted primarily by the bank's subsidiary DKB. On aggregate,BayernLB's consumer goods, tourism, wholesale and retail trade (€7.9 billion exposure as of year-end 2020) and logistics and aviation(€8.5 billion) exposures, which, in general, we consider highly vulnerable to the spread of the pandemic, comprised €16.3 billion ofcredit exposures. We understand the bank benefits from continued sound credit performance even within the aforementioned sectorsthat represented a still-manageable 145% of the bank's tangible common equity (TCE) as of December 2020.

Exhibit 3

BayernLB's lending and securities book is diversified acrosssegmentsBayernLB's €313.4 billion of total credit exposures as of year-end 2020 splitby segment

Exhibit 4

BayernLB's corporate lending exposures are also well diversifiedby industry, but an extended downturn would challenge its assetqualityBayernLB's €74.7 billion of corporate credit exposures as of year-end 2020split by industry

Public sector29%

Corporates24%

Commercial Real Estate19%

Financial institutions17%

Retail11%

Source: Company report

Utilities34%

Logistics & aviation11%

Consumer goods, tourism, wholesale & retail11%

Telecoms, media & technology10%

Manufacturing & engineering, aerospace & defence9%

Automotive7%

Raw materials, oil & gas7%

Chemicals, pharmaceuticals & healthcare6%

Construction5%

Each 15% of credit exposure represented around 1x the bank's TCE as of year-end 2020.Source: Company report

BayernLB is currently undergoing a transformation process scheduled to conclude in 2024. Under its strategic plan, the bank aims tobuild on the dynamic growth of its key direct banking subsidiary, DKB. This will be accompanied by a business focus on commercial realestate and select corporate sectors, which will transform the group further away from a full-fledged universal bank model. The planinvolves significant investments to upgrade information technology systems and a significant reduction in its capital-markets-orientedbusinesses.

In line with its strategic focus, BayernLB expanded its commercial real estate portfolio by 7% since year-end 2019 to €59.3 billion,comprising over 5x the bank's TCE. This concentration is somewhat mitigated by BayernLB's pronounced focus on multifamily housing(€36.6 billion as of December 2020) focused on the German market, in which 88% of BayernLB's overall CRE exposure originates,and a large €22 billion sub-portfolio within the multifamily portfolio of lower-risk financings for social housing, sponsored by Germanmunicipalities. Subsegments with greater vulnerability to the pandemic include retail properties (€4.4 billion) and managed real estate(including logistics, hotels and social care, together accounting for €7.1 billion of exposures) as of January.

Despite the challenging economic environment, BayernLB's problem loans improved to 1.0% of gross loans (year-end 2019: 1.1%).



Exhibit 5

BayernLB successfully decreased its legacy exposures, increased problem loan coverage reflects increase in general loan loss reserves

0%

10%

20%

30%

40%

50%

60%

70%

80%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2016 2017 2018 2019 2020

Problem Loans / Gross Loans Coverage ratio (right axis)

The problem loan ratio is according to our definition.Sources: Company reports and Moody's Investors Service

Sound capital ratiosBayernLB's financial strength is underpinned by its sound capital ratios and ability to generate capital through profit retention. Weassign a Capital score of a3 to BayernLB, four notches below the aa2 initial score, because we include negative adjustments for thebank's high leverage; the adjustment further reflects our expectation of an increase in RWA in a deteriorating credit environment andregulatory deductions that have not been taken into consideration in the bank's TCE.

As of year-end 2020, BayernLB's TCE equalled 17.3% of its RWA (our key capital metric, year-end 2019: 17.5%). TCE has slightlydropped from €11.3 billion as of year-end 2019 to €11.2 billion, while RWA remained broadly unchanged at €65.0 billion from €64.6billion as of year-end 2019.

In 2020, the gap between BayernLB's 17.3% TCE ratio and its 15.9% regulatory Common Equity Tier 1 (CET1) capital ratio decreasedslightly. The €0.9 billion difference in absolute capital amounts between TCE and CET1 largely results from €0.7 billion of regulatorydeductions related to promotional loans handed out by BayernLabo, a fully consolidated development bank within BayernLB thatbenefits from a guarantee on its liabilities from BayernLB's majority owner, the Free State of Bavaria.

The bank's fully loaded Tier 1 leverage ratio of 4.3% as of year-end 2020 slightly increased from 4.2% as of year-end 2019, after adecrease in H1 2020 to 3.7%. This increase was mainly because of CRR2 “Quick Fix”, which allowed banks to temporary excludeexposures to central banks from the calculation of their total risk exposures. Without the deduction from the denominator the leverageratio would have remained at 3.7%.

We expect the regulatory leverage ratio to improve once the updated capital requirement regulation (CRR2) come into force, underwhich intra-sector and promotional lending exposures will be excluded from the ratio's denominator.



Exhibit 6

BayernLB has maintained solid levels of capitalExhibit 7

BayernLB's Tier 1 capital requirements in detail

16.9%17.5% 17.3%

15.2%15.9% 15.9%

5.1% 5.1%4.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2018 2019 2020

TCE ratio CET1 ratio (transitional) TCE leverage ratio

TCE = Tangible common equity (Moody's calculation). CET1 = Common Equity Tier 1 (afterearnings appropriation).Sources: Company reports and Moody's Investors Service

10.13% 10.13%

0%

2%

4%

6%

8%

10%

12%

2020 2021

Pillar 1 - CET1 Pillar 1 - Tier 1Pillar 2 Capital conservation bufferCountercyclical buffer O-SII buffer

Tier 1 Pillar II represents 75% of the total Pillar II requirement.Source: Company reports

Profitability is challenged by low interest rates and the weak economic outlookWe assign a b1 Profitability score, same as the initial score, reflecting our expectation that profitability will remain at modest levelswithin the challenging credit environment and as a result of the bank's ongoing transformation process. The b1 score also reflects thegrowing role of the more cost-efficient subsidiary, DKB, within the group.

BayernLB's 2020 results were hurt by the disruption caused by the pandemic, with the bank reporting a €195 million pretax profit,down from €656 million in 2019. The main drivers were higher risk provisioning and higher administrative costs, while revenueremained stable overall.

The bank's main revenue components improved slightly despite the economic downturn. Its 2020 net interest income was €1,772million (up from €1,726 million in 2019) and net commission income was €331 million (up from €287 million in 2019). Gains fromfair value measurement contributed €62 million to the pretax result, after a loss of €2 million in 2019. Other income declined to €75million in 2020, down from €159 million as of year-end 2019. On aggregate, this has left 2020 revenue only marginally higher than ayear before.

However, the bank set aside a net amount of €142 million in loan-loss provisions (2019: €251 million reversal) to cover credit risksfrom the pandemic. BayernLB benefitted from the reversal of €195 million of provisions booked for legacy cases, whereas the bankadded €266 million in post-model adjustments to its general loan loss reserves. Other cost drivers were administrative expenses, whichincreased year over year by €74 million to €1,520 million as a result of capital spending on DKB's expansion strategy and a temporaryincrease in costs associated with workforce reduction, which will lower BayernLB's costs in the long run. Finally, expenses for the banklevy and deposit guarantee scheme increased to €161 million (2019: €134 million).

BayernLB's already-high dependence on interest income has increased with the growth of its main earnings contributor, DKB, whichaccounted for a pretax profit of €264 million included in the group's earnings in 2020. At the same time, DKB's relative earningsstability will continue to reduce earnings volatility, and with its superior cost-income dynamics, the subsidiary will help mitigaterevenue and cost pressures in the group's Munich-based operations.



Exhibit 8

Loan-loss provisioning and administrative expense drove 2020 profit lower

0.7 0.5 0.6 0.5 0.5 0.4

-3

-2

-1

0

1

2

3

2015 2016 2017 2018 2019 2020

€ m

illio

n

Net interest Income Net fees and commissions income Trading & other incomeAdmin. Expenses Risk provisions Extraordinary income and expensePre-tax profit

Sources: Company reports, Moody's Financial Metrics and Moody's Investors Service estimates

BayernLB's funding profile remains partly dependent on wholesale marketsWe assign a Funding Structure score of baa3 to BayernLB, six notches above the b3 initial score, which includes positive adjustmentsfor the bank's pass-through concessionary funding from Germany's development banks, included in interbank liabilities. We alsoassume BayernLB will repay the temporarily elevated drawings under the ECB's TLTRO III, which will result in a reversal of currentlyincreased market funding and liquidity ratio.

Exhibit 9

BayernLB's dependence on market funding increased in 2020Composition of funding sources

44%48% 50% 51%

54%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2017 2018 2019 2020

Equity Other liabilities Trading liabilities Issued securities Interbank Deposits Market Funds Ratio*

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

Although BayernLB's €152 billion of gross customer loans far exceeded the group's €92 billion of customer deposits (sourced primarilythrough DKB) as of year-end 2020, the bank's actual reliance on wholesale funds reduced through the use of €35 billion of fundingfrom development banks (primarily through its in-house regional development bank, BayernLabo) and through covered bonds issued byBayernLB and DKB (€29 billion of outstanding issuances between them as of year-end 2020).

As of December 2020, BayernLB reported €30.3 billion of junior senior unsecured liabilities, of which €19.2 billion had been placedas bearer bonds and the remainder had been sourced through private placement products (registered bonds and promissory notes).In addition, more than a third of the group's €5.4 billion of senior unsecured liabilities outstanding has been sourced through privateplacement products, which further mitigates the bank's overall reliance on wholesale funding.

In 2020, the balance sheet increase of €30.3 billion was primarily funded through deposits and interbank borrowing. Among interbanksources, participation in the ECB's TLTRO III lending programme was the main driver of an increase to €70.4 billion as of 31 December



2020, up from €46.3 billion as of year-end 2019. We consider the group's €27 billion of TLTRO III funding sourced during 2020 to bepredominantly of a temporary nature and very likely to be repaid to a substantial degree when the ECB stops offering its currently veryattractive terms. In 2020, customer deposits, too, increased to €102.3 billion, up from €92.7 billion.

BayernLB's sound liquidity reserves mitigate funding risksBayernLB's sound liquidity is reflected in its assigned Liquidity score of baa1. Our negative adjustment from the a1 initial score includesadjustments for encumbered liquid assets used as collateral and pass-through interbank claims related to promotional loans, as well asour expectation that the currently high liquidity levels will not be sustained once TLTRO funding is repaid.

Exhibit 10

BayernLB's liquid resources have increased moderatelyComposition of liquid assets

30% 32% 32% 31%37%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2017 2018 2019 2020

Other assets Loans Securities/Investments Interbank Cash Liquid Banking Asset Ratio*

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

BayernLB's short-term liquidity gaps from funding mismatches are suitably covered by liquidity buffers. The bank's comfortable liquidityis illustrated by its LCR of 245% as of year-end 2020 (2019: 168%). The strongly improved metric was supported by a temporaryincrease in liquid resources in conjunction with the group's access to TLTRO III funding. As of 31 December 2020, BayernLB's cashbalances grew to €9.3 billion from €8.5 billion as of year-end 2019.

BayernLB and DKB possessed significant issuance leeway, under their respective public-sector and mortgage covered bondprogrammes, of €16.5 billion as of December 2020 before the programmes would hit required minimum overcollateralisation levels tomaintain their current Aaa ratings or the legal minimum of 2%.

Environmental, social and governance (ESG) considerationsIn line with our general view on the banking sector, BayernLB has low exposure to environmental risks (see our environmental risks heatmap7 for further information).

BayernLB's subsidiary DKB has a strong focus on conducting sustainable business with one of the largest renewables financing portfolioin Germany and refinances itself with green and social bond programmes. Thus, we evaluate the bank to have an overall low exposureto environmental risks.

For social risks, we also place BayernLB in line with our general view on the banking sector, which indicates a moderate exposure. Thisincludes considerations in relation to the rapid and widening spread of the coronavirus pandemic, given the substantial implications forpublic health and safety and deteriorating global economic outlook, creating a severe and extensive credit shock across many sectors,regions and markets. For further information see our social risks heat map8).

Governance9 is highly relevant for BayernLB, as it is to all banks. However, we do not have any particular governance concern forBayernLB and we do not apply any corporate behaviour adjustment to the bank. Nonetheless, corporate governance remains a keycredit consideration and continues to be a subject of our ongoing monitoring.






Support and structural considerationsAffiliate supportBayernLB benefits from S-Finanzgruppe's cross-sector support, which reduces the probability of default because such support wouldbe available for stabilising a distressed member bank and not just compensating for losses in resolution. Our assumption of high cross-sector support provides one notch of rating uplift, leading to an Adjusted BCA of baa1.

Loss Given Failure (LGF) analysisBayernLB is subject to the EU Bank Recovery and Resolution Directive, which we consider an operational resolution regime. Therefore,we apply our Advanced LGF analysis, where we consider the risks faced by the different debt and deposit classes across the liabilitystructure should the bank enter resolution.

We assume residual TCE of 3%, losses post-failure of 8% of tangible banking assets, a 26% proportion of junior deposits, a 25% run-offof these before failure and a 5% run-off in preferred deposits. These metrics are in line with our standard assumptions.

» For BayernLB's deposits and senior unsecured debt, rated Aa3, our LGF analysis indicates an extremely low loss given failure, leadingto a three-notch uplift from the bank's baa1 Adjusted BCA.

» For junior senior unsecured debt, rated A2, our LGF analysis temporarily indicates a low loss given failure, which however we expectto revert to a very low loss given failure once BayernLB's increased total assets normalise, leading to a two-notch uplift from its baa1Adjusted BCA.

» For subordinated debt, rated Baa2, our LGF analysis indicates a high loss given failure, leading us to position the rating one notchbelow the baa1 Adjusted BCA.

Government support considerationsGiven its size on a consolidated basis, we consider S-Finanzgruppe domestically and systemically relevant. Therefore, we assume amoderate probability of German government support for all direct member banks of the sector's institutional protection scheme, inline with our support assumptions for other systemically relevant banking groups in Europe. For BayernLB, this results in an additionalgovernment support uplift of one notch for its long-term senior unsecured debt and deposit ratings.

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

BayernLB's CRRs are positioned at Aa3/P-1The CRRs, before government support, are positioned three notches above the Adjusted BCA of baa1, reflecting the extremely low lossgiven failure from the high volume of instruments that are subordinated to CRR liabilities. BayernLB's CRRs benefit from one notch ofrating uplift based on government support, in line with our support assumptions on deposits and senior unsecured debt.

Counterparty Risk (CR) AssessmentThe CR Assessment is an opinion of how counterparty obligations are likely to be treated if a bank fails and are distinct from debt anddeposit ratings in that they consider only the risk of default rather than both the likelihood of default and expected financial loss; andapply to counterparty obligations and contractual commitments rather than debt or deposit instruments. The CR Assessment is anopinion of the counterparty risk related to a bank's covered bonds, contractual performance obligations (servicing), derivatives (forexample, swaps), letters of credit, guarantees and liquidity facilities.



BayernLB's CR Assessment is positioned at Aa3(cr)/P-1(cr)The CR Assessment, before government support, is positioned three notches above the Adjusted BCA of baa1, reflecting the extremelylow loss given failure. BayernLB's CR Assessments benefit from one notch of rating uplift based on government support, which is in linewith our support assumptions on deposits and senior unsecured debt.

Methodology and scorecardThe principal methodology used in rating BayernLB is our Banks methodology, published in March 2021.

About Moody's Bank ScorecardOur scorecard is designed to capture, express and explain in summary form our Rating Committee's judgement. When read inconjunction with our research, a fulsome presentation of our judgement is expressed. As a result, the output of our scorecardmay materially differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strongdivergence). The scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down toreflect conditions specific to each rated entity.




Rating methodology and scorecard factors

Exhibit 11

Bayerische Landesbank

Macro FactorsWeighted Macro Profile Strong + 100%

Factor HistoricRatio

InitialScore

ExpectedTrend

Assigned Score Key driver #1 Key driver #2

SolvencyAsset RiskProblem Loans / Gross Loans 1.1% aa3 ↓ baa1 Sector concentration Market risk

CapitalTangible Common Equity / Risk Weighted Assets(Basel III - fully loaded)

17.3% aa2 ↔ a3 Nominal leverage Expected trend

ProfitabilityNet Income / Tangible Assets 0.2% b1 ↔ b1 Expected trend Return on assets

Combined Solvency Score a2 baa2LiquidityFunding StructureMarket Funds / Tangible Banking Assets 53.7% b3 ↔ baa3 Extent of market

funding relianceExpected trend

Liquid ResourcesLiquid Banking Assets / Tangible Banking Assets 36.6% a1 ↔ baa1 Asset encumbrance Stock of liquid assets

Combined Liquidity Score ba1 baa2Financial Profile baa2Qualitative Adjustments Adjustment

Business Diversification 0Opacity and Complexity 0Corporate Behavior 0

Total Qualitative Adjustments 0Sovereign or Affiliate constraint AaaBCA Scorecard-indicated Outcome - Range baa1 - baa3Assigned BCA baa2Affiliate Support notching 1Adjusted BCA baa1

Balance Sheet in-scope(EUR Million)

% in-scope at-failure(EUR Million)

% at-failure

Other liabilities 110,562 44.8% 119,889 48.6%Deposits 91,436 37.0% 82,110 33.3%

Preferred deposits 67,663 27.4% 64,280 26.0%Junior deposits 23,773 9.6% 17,830 7.2%Senior unsecured bank debt 5,449 2.2% 5,449 2.2%Junior senior unsecured bank debt 30,257 12.3% 30,257 12.3%Dated subordinated bank debt 1,654 0.7% 1,654 0.7%Junior subordinated bank debt 29 0.0% 29 0.0%Preference shares (bank) 2 0.0% 2 0.0%Equity 7,404 3.0% 7,404 3.0%Total Tangible Banking Assets 246,793 100.0% 246,793 100.0%



De Jure waterfall De Facto waterfall NotchingDebt ClassInstrumentvolume +

subordination

Sub-ordination

Instrumentvolume +

subordination

Sub-ordination

De Jure De FactoLGF

NotchingGuidance

vs.Adjusted

BCA

AssignedLGF

notching

AdditionalNotching

PreliminaryRating

Assessment

Counterparty Risk Rating 25.4% 25.4% 25.4% 25.4% 3 3 3 3 0 a1Counterparty Risk Assessment 25.4% 25.4% 25.4% 25.4% 3 3 3 3 0 a1 (cr)Deposits 25.4% 15.9% 25.4% 18.2% 3 3 3 3 0 a1Senior unsecured bank debt 25.4% 15.9% 18.2% 15.9% 3 3 3 3 0 a1Junior senior unsecured bank debt 15.9% 3.7% 15.9% 3.7% 1 1 1 2 0 a2Dated subordinated bank debt 3.7% 3.0% 3.7% 3.0% -1 -1 -1 -1 0 baa2

Instrument Class Loss GivenFailure notching

Additionalnotching

Preliminary RatingAssessment

GovernmentSupport notching

Local CurrencyRating

ForeignCurrency

RatingCounterparty Risk Rating 3 0 a1 1 Aa3 Aa3Counterparty Risk Assessment 3 0 a1 (cr) 1 Aa3(cr)Deposits 3 0 a1 1 Aa3 Aa3Senior unsecured bank debt 3 0 a1 1 Aa3 Aa3Junior senior unsecured bank debt 2 0 a2 0 A2 A2Dated subordinated bank debt -1 0 baa2 0 Baa2 Baa2[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 12

Category Moody's RatingBAYERISCHE LANDESBANK

Outlook StableCounterparty Risk Rating Aa3/P-1Bank Deposits Aa3/P-1Baseline Credit Assessment baa2Adjusted Baseline Credit Assessment baa1Counterparty Risk Assessment Aa3(cr)/P-1(cr)Issuer Rating Aa3Senior Unsecured Aa3Junior Senior Unsecured A2Junior Senior Unsecured MTN -Dom Curr (P)A2Subordinate Baa2Commercial Paper -Dom Curr P-1Other Short Term -Dom Curr (P)P-1

DEUTSCHE KREDITBANK AG

Outlook StableCounterparty Risk Rating A1/P-1Bank Deposits A1/P-1Baseline Credit Assessment baa2Adjusted Baseline Credit Assessment baa1Counterparty Risk Assessment A1(cr)/P-1(cr)Issuer Rating A1Senior Unsecured -Dom Curr A1Junior Senior Unsecured -Dom Curr A2ST Issuer Rating P-1

Source: Moody's Investors Service



Endnotes1 The ratings shown are S-Finanzgruppe's corporate family rating, outlook and BCA.

2 The ratings shown are DKB's deposit and issuer ratings, outlook and BCA.

3 The rating shown is Bavaria's issuer rating and outlook.

4 The ratings shown are BayernLabo's backed deposit and backed senior unsecured debt ratings and outlook.

5 These are available on the landing pages of the banks on our website.

6 Reported total assets are before our adjustments, including, but not limited to derivatives netting.

7 Environmental risks can be defined as environmental hazards encompassing the impact of air pollution, soil/water pollution, water shortages and naturaland man-made hazards (physical risks). Additionally, regulatory or policy risks, such as the impact of carbon regulations or other regulatory restrictions,including the related transition risks such as policy, legal, technology and market shifts, that could impair the evaluation of assets are important factors.Certain banks could face a higher risk from concentrated lending to individual sectors or operations exposed to the aforementioned risks.

8 Social risk considerations include customer relations, human capital, demographic and social trends, health and safety and responsible production. Themost 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 andcustomer privacy, which are partially offset by sizeable technology investments and banks’ long track record of handling sensitive client data. Fines andreputational damage because of product mis-selling or other types of misconduct are further social risks. Social trends are also relevant in a number ofareas, such as shifting customer preferences towards digital banking services, which increase information technology costs; ageing population concerns inseveral countries, which affects demand for financial services; or socially driven policy agendas that translate into regulations that affect banks’ revenuebases.

9 Corporate governance is a well-established key driver for banks and related risks are typically included in our evaluation of banks' financial profile. Furtherfactors like specific corporate behaviour, key-person risk, insider and related-party risk, strategy and management risk factors and dividend policy maybe captured in individual adjustments to the BCA, if deemed applicable. Corporate governance weaknesses can lead to a deterioration in a company’scredit quality, while governance strengths can benefit its credit profile. When credit quality deteriorates because of poor governance, such as breakdownin controls resulting in financial misconduct, it can take a long time to recover. Governance risks are also largely internal rather than externally driven.



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Documents

Bayerische Landesbank