The announcement follows the rating action on the parent bank BCP
London, 29 March 2012 -- Moody's Investors Service has today confirmed the Baa3 long-term
local and foreign-currency deposit ratings of Bank Millennium (BM),
with a negative outlook. BM is the Polish subsidiary of Banco Comercial
Portugues, S.A. (BCP; Ba3/NP/E+, outlook
negative).
At the same time BM's D standalone bank financial strength rating
(BFSR) -- mapping to Ba2 on the long-term scale -
was confirmed with a negative outlook. The short-term rating
of Prime-3 was also confirmed.
The confirmation reflects BM's intrinsic risk profile and Moody's
view that BM has a sufficiently low degree of credit linkage with its
parent BCP, to have a stand-alone credit assessment three
notches above that of its parent. However, the negative outlook
on both BM's long-term deposit rating and BFSR reflect the
negative outlook on the parent's ratings and capture the risk that
any further downgrade of BCP would indicate levels of stress within the
Portuguese group that could present contagion risks for BM.
Today's rating announcement on BM concludes the review initiated
on the 21 February 2012, when BM's long-term ratings
were placed on review for downgrade, following a similar rating
action on the parent. It also follows the wider rating actions
on the CEE and CIS subsidiaries of Western European banks on 21 of February
2012, taken in order to investigate increasing concerns regarding
whether ongoing pressures on parent groups affect subsidiaries' standalone
credit profiles through their close financial, branding and managerial
linkages (see "Moody's reviews ratings of bank subsidiaries in CEE
and CIS for downgrade" published on DD March 2012).
For additional information on bank ratings, please refer to the
webpage containing Moody's related announcements http://www.moodys.com/bankratings2012.
RATINGS RATIONALE
In its press release of 21 February 2012, Moody's noted that the
review of the CEE and CIS subsidiary's standalone credit assessments relative
to the Western European parental groups' ratings would focus on
the potential impact on the franchise of subsidiaries, their funding
dependence on the parent, regulatory barriers to control the distribution
of capital resources from the subsidiary to the parent and idiosyncratic
challenges in local markets.
Assessing the above mentioned criteria, Moody's has concluded that
there is a limited degree of direct credit linkage between BM and BCP,
reflected in the three-notch difference between the subsidiary's
and parent's standalone credit assessments. However,
given the fact that the parent's standalone rating was lowered to
B2 with a negative outlook, any further downgrade would indicate
levels of stress within the Portuguese group that could present contagion
risks for BM. These could ultimately weaken the strength of BM's
franchise, its funding base and liquidity position due to a spill-over
effect resulting in increasing difficulties to deal with the bank's
financial market counterparties and securing corporate deposits compounding
liquidity pressures for the Polish subsidiary. Therefore,
the outlook on BM's standalone rating and the deposit ratings have
been aligned with the negative outlook on the parent's ratings.
FACTORS THAT PARTLY INSULATE BM FROM BCP's CREDIT RISKS
The following factors support Moody's view that the Polish subsidiary
is relatively well insulated from the weaknesses currently affecting its
Portuguese parent:
(i) Although BM is majority owned by BCP at 65.5%,
the consistency and transparency of the bank's strategy is supported
by active minority shareholders and quarterly public disclosures,
due to its presence on the Warsaw stock exchange. In light of this,
BM's strategy for the coming year -- as presented
in the latest results announcement -- sets financial targets
that are in line with the objectives of the past two years and involves
gradual de-risking of the balance sheet.
(ii) The relatively granular balance sheet of BM has remained stable for
the past three years since the inception of the crisis, regardless
of the pressures experienced by the parent group.
(iii) Moody's also notes that, in compliance with the guidelines
set by the Polish regulatory authority (KNF) for dividend distributions,
the bank intends to fully maintain its 2011 profits, thus improving
its Tier 1 ratio to 12.3%..
(iv) BM has limited exposure to the parent bank in terms of funding dependence;
BM has historically maintained an undrawn stand-by facility of
EUR200 million (1.7% of total assets as of end-2011).
Increasingly, since the beginning of 2011 BM has used international
market participants and multi-lateral financial organisations as
its principal counterparts in derivatives transactions to minimise its
FX mismatches due to the large portion of Swiss-franc denominated
lending (51.4%) in its loan book.
What can change rating up/down
Given the recent rating action and negative outlooks on stand-alone
and supported ratings of BM an upgrade is unlikely in the short-term.
A downgrade in BM's ratings could be triggered by a further downgrade
of the parent's stand-alone credit assessment, or a
deterioration of its own intrinsic credit characteristics.
The methodologies used in this rating were Bank Financial Strength Ratings:
Global Methodology published in February 2007, and Incorporation
of Joint-Default Analysis into Moody's Bank Ratings:
A Refined Methodology published in March 2007. Please see the Credit
Policy page on www.moodys.com for a copy of these methodologies
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
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for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may
exist between directors of MCO and rated entities as well as (C) the names
of entities that hold ratings from MIS that have also publicly reported
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A member of the board of directors of this rated entity may also be a
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however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
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Consequently, Moody's provides a date that it believes is
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for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Irakli Pipia
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Yves Lemay
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
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Moody's confirms Bank Millennium at Baa3/P-3/D; outlook negative
