Madrid, October 24, 2012 -- Moody's Investors Service has today downgraded the senior debt and
deposit ratings of Liberbank to Ba3 from Ba2 and lowered the bank's
standalone bank financial strength rating (BFSR) to E (equivalent to a
caa1 standalone credit assessment), from D-/ba3. The
downgrade reflects the higher risk for senior creditors arising from the
termination of the planned merger with Ibercaja Banco (Ibercaja;
Ba2 senior debt and deposit ratings; BFSR D-/BCA ba3) and
Caja 3 (unrated).
The lower level for Liberbank's standalone credit assessment also
considers the fact that it now needs to go through a recapitalisation
or restructuring process with a high likelihood of requiring public support
to reinforce its capital. All of Liberbank's ratings remain
on review for downgrade. The ratings of Ibercaja are unchanged
and remain on review for downgrade.
Separately, Moody's has today taken a range of actions on
the ratings of a total of 31 Spanish banks. These actions are discussed
in a release titled "Moody's concludes rating reviews on majority
of Spanish banks after sovereign rating confirmation", published
today. A third release discusses specifically the rationale behind
today's actions on banks involved in ongoing merger processes (see
"Moody's confirms ratings of Caixabank, La Caixa,
Banco Sabadell and Banco CAM, maintains other banks on review").
A list of all ratings affected by today's actions on Spanish banks
is available by clicking this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_146671
.This list is an integral part of this release.
For additional information on bank ratings, please refer to the
webpage containing Moody's related announcements http://www.moodys.com/eusovereign
RATINGS RATIONALE
STANDALONE CREDIT STRENGTH
The four-notch downgrade of Liberbank's standalone credit assessment
to E/caa1 from D-/ba3 follows the break-up on 9 October
2012 of the merger process between Ibercaja and Caja 3. The failed
integration of these two banks requires Liberbank to submit an individual
recapitalisation plan to Bank of Spain in October.
In the evaluation performed by Oliver Wyman, Liberbank presented
a capital shortfall of EUR1.2 billion (representing 4.3%
of RWAs), which increases the likelihood that this bank will need
public support to recapitalise in view of insufficient internal capital
generation capacity and a low likelihood that it will be able to attract
private investors to provide the required amount. Consistent with
Moody's definitions, the lower standalone credit assessments
reflect the rating agency's view that Liberbank has speculative intrinsic,
or standalone, financial strength and is subject to very high credit
risk absent any possibility of extraordinary support from the government.
Ibercaja's D- standalone BFSR and ba3 BCA are unchanged and
remain on review for downgrade, reflecting the significant downside
risks to its standalone credit profile. In concluding the review
for downgrade of Ibercaja's ratings, Moody's will take
into consideration the recapitalisation plan that the bank needs to submit
in October following the break-up of the merger with Liberbank
and Caja 3. On an individual basis, Ibercaja displayed a
EUR226 million (1% of RWAs) capital shortfall under Oliver Wyman's
stress test exercise. These limited recapitalisation needs underpin
the current standalone credit assessment of Ibercaja, although Moody's
notes that the bank's standalone profile could come under significant
pressure if Ibercaja fails to meet capital shortfall from private means.
LONG-TERM RATINGS
The one-notch downgrade of Liberbank's senior debt and deposit
ratings to Ba3 reflects (1) the further deterioration of its standalone
credit profile, as discussed above; and (2) uncertainty around
the initiatives to be undertaken within the recapitalisation plan.
If Liberbank is unable to meet the EUR1.2 billion capital shortfall
from private sources, the bank would need to present a restructuring
plan before receiving any type of public support and Moody's believes
that it is very likely the Spanish government would impose losses on Liberbank's
subordinated debt and hybrid instruments in such a scenario.
Ibercaja's Ba2 senior long-term debt and deposit ratings
are unchanged given that Moody's support assumptions are unchanged.
These ratings remain on review for downgrade, in line with Ibercaja's
standalone credit assessment.
SUBORDINATED DEBT AND HYBRID RATINGS
In today's rating action, Moody's has also downgraded
the subordinated debt of Liberbank to Caa2 from B1 and the hybrid instruments
to Ca from Caa1. The downgrade reflects the increased likelihood
that losses could be imposed on these instruments if Liberbank is deemed
to require public-sector capital.
Ibercaja's subordinated debt and hybrid ratings are unchanged.
OUTLOOKS AND REVIEW STATUS
All ratings of Liberbank are on review for further downgrade reflecting
the downside pressures on its standalone creditworthiness. In assessing
the bank's standalone credit assessment along with the senior debt
and deposit ratings, Moody's will take into consideration
the recapitalisation or restructuring plan that Liberbank will present
in October. Consistent with the rating actions taken on 5 October
2012 on the subordinated debt and hybrid instruments of banks in a restructuring
process http://www.moodys.com/research/Moodys-takes-actions-on-4-Spanish-banking-groups-due-to--PR_255526,
Moody's expects to act on Liberbank's subordinated debt and
hybrid ratings if it becomes very likely that Liberbank finally requires
public assistance.
WHAT COULD MOVE THE RATINGS UP/DOWN
Downwards pressure on the banks' ratings might develop if operating conditions
worsen beyond Moody's current expectations, i.e. a
broader economic recession beyond our current GDP decline forecasts of
-1.7% for 2012 and -1% for 2013;
especially given that this is likely to result in asset-quality
deterioration exceeding Moody's current expectations; and/or if pressures
on market-funding intensify.
Upwards pressure on the ratings may develop upon the successful implementation
of the government's plan to stabilise the banking system, to the
extent that the banks' resilience to the challenging prevailing conditions
improves. Likewise, any improvement in the standalone strength
of banks arising from stronger earnings, improved funding conditions
or the work-out of asset-quality challenges could result
in rating upgrades.
RESEARCH REFERENCES
- Moody's confirms Spain's government bond rating at Baa3/(P)P-3,
assigns negative outlook (http://www.moodys.com/research/Moodys-confirms-Spains-government-bond-rating-at-Baa3PP-3-assigns--PR_257500),
16 Oct 2012
- Moody's takes actions on 4 Spanish banking groups due to
restructuring framework (http://www.moodys.com/research/Moodys-takes-actions-on-4-Spanish-banking-groups-due-to--PR_255526),
5 Oct 2012
- Sector Comment: Spanish Banks' Upcoming Recapitalization
Is Credit Positive, but May Be Insufficient (http://www.moodys.com/research/Spanish-Banks-Upcoming-Recapitalization-Is-Credit-Positive-but-May-Be--PBC_145834),
1 Oct 2012
- Banking System Outlook: Spain (http://www.moodys.com/research/Banking-System-Outlook-Spain--PBC_144617),
17 Aug 2012
- Moody's downgrades Spanish banks (http://www.moodys.com/research/Moodys-downgrades-Spanish-banks--PR_249316),
25 Jun 2012
- How Sovereign Credit Quality May Affect Other Ratings (http://www.moodys.com/research/How-Sovereign-Credit-Quality-May-Affect-Other-Ratings--PBC_139495),
13 Feb 2012
- Moody's to assign backed Aaa ratings to new euro-denominated
long-term debt securities covered by Spanish government's guarantee
(http://www.moodys.com/research/Moodys-to-assign-backed-Aaa-ratings-to-new-euro-denominated--PR_171216),
22 January 2009
PRINCIPPAL METHODOLOGY
The principal methodology used in these ratings was Moody's Consolidated
Global Bank Rating Methodology published in June 2012. Please see
the Credit Policy page on www.moodys.com for a copy of this
methodology.
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 ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings 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
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings 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 entities or their 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.
.
Please see the ratings disclosure page on www.moodys.com
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 to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
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 ratings were fully digitized and accurate data may not
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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.
Maria Jose Mori
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
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Johannes Wassenberg
MD - Banking
Financial Institutions Group
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SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
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Madrid 28002
Spain
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Moody's downgrades Liberbank to Ba3, maintains review for downgrade of Ibercaja Banco, following merger break-up
