Bayernhypo on S&PWatch;Bayerische Vereinsbnk Rtgs Afd.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/21/97 --Standard & Poor's today has placed its ratings on Bayerische Hypotheken - und Wechselbank AG (Bayernhypo) on CreditWatch with positive implications (see list below).

At the same time, Standard & Poor's has affirmed its ratings on Bayerische Vereinsbank AG (BV) (see list below).

The rating action follows the announcement that the boards of Bayernhypo and BV have proposed a merger to form Bayerische Hypo - und Vereinsbank AG (BHV).

The rating actions are based on the potential for a stronger market position of the new group in its core markets, a certain degree of cost savings, and the low level of additional financial risk incurred. In the first step of a two-stage merger plan, shareholders in Bayernhypo would be offered shares in German insurance group Allianz AG at a rate of one Allianz share per six Bayernhypo shares held. Thus, BV will reduce its stake in Allianz and receive 45% of Bayernhypo's shares, putting a value of about DM9 billion at the stake in Bayernhypo. Upon acceptance of the share swap, BV will increase its share capital by an amount of nominal DM150 million, worth about DM2.7 billion at current share price levels. In a second step, the full merger of the two banks, which is described by the banks' management as a merger among equals, would be prepared from October 1997. Independent auditors will fix the conversion rate on the basis of the 1997 audit and the merger contract will then be presented to shareholders for approval by spring 1998 at the latest.

With combined total assets of DM743 billion (based on 1996 figures) and initially about 40,000 employees and more than 1,250 branches, the new entity BHV will be the second largest banking group in Germany, however with a strong regional concentration in the banks' traditional home markets in Bavaria. As a mixed mortgage bank, BHV will combine general commercial banking with mortgage and public sector lending. The proposed combination should enable the new group to further strengthen its strong market position in domestic real estate financing. The merger is also expected to permit cost savings in the areas of back-office, technology and administration. Standard & Poor's is also confident that the management of the new entity will seriously address the issue of a largely overlapping branch network. However, without further details known at this stage, Standard & Poor's believes that management's expectations to achieve annual cost savings of about DM1 billion over the next five years, are very ambitious.

Financially, the proposed merger structure will involve no additional debt and should have a neutral impact on the new group's capitalization through the combination of the share swap and the subsequent capital increase at BV. -- CreditWire -0-

RATINGS PLACED ON CREDITWATCH WITH POSITIVE IMPLICATIONS
                                                       Ratings
Bayerische Hypotheken- und Wechselbank AG
  Counterparty ratings                                 A+/A-1
  CDs                                                  A+/A-1
  Senior unsecured debt                                A+
  Subordinated debt                                    A
Hypo U.S. Finance Inc.
  Commercial Paper*                                    A-1
Bayernhypo Finance N.V.
Senior unsecured debt                                  A+
Subordinated debt                                      A
Hypo Finance (Ireland)
Counterparty ratings                                  N.R./A-1
Commercial Paper                                       A-1
RATINGS AFFIRMED
Bayerische Vereinsbank AG
  Counterparty ratings                                N.R./A-1+
  CDs                                                 N.R./A-1+
  Commercial Paper                                     A-1+
  Oeffentliche Pfandbriefe (bonds)                     AAA
Vereinsbank Finance (Delaware) Inc.
  Counterparty ratings                                N.R./A-1+
*Gtd. by Bayerische Hypotheken- und Wechselbank AG.

CONTACT: Scott Bugie, Paris (33) 1-4420-6680

Michael Zlotnik, Frankfurt (49) 69-138709-18