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Announcement:

Moody's maintains review for downgrade of Denizbank's C- BFSR

Global Credit Research - 23 Apr 2012

Announcement follows rating action on Dexia Group

Frankfurt am Main, April 23, 2012 -- Moody's Investors Service has today announced an extension of the review for downgrade of Denizbank's C- standalone bank financial strength rating (BFSR) -- mapping to a baa2 standalone credit strength -- and the Baa2/P-2 global local-currency (GLC) deposit ratings. The announcement follows Moody's recent downgrade of the BFSR of Dexia Credit Local (DCL) to E, mapping to a caa1 standalone credit strength (see press release "Moody's downgrades Dexia Credit Local to Baa2; outlook negative" dated 18 April 2012).

The focus of the review will comprise (i) Moody's globally revised assessment of the linkage between the credit profiles of sovereigns and financial institutions; and (ii) any potential adverse consequences from the weak creditworthiness of DCL for Denizbank, as a Dexia Group non-core subsidiary which is up for sale.

Moody's expects to conclude the review of Denizbank, together with the rating reviews of other Turkish banks. The reviews were initiated on 16 March 2012 (see press release "Moody's reviews Turkish banks' local currency issuer and deposit ratings for downgrade").

The Ba3 foreign-currency deposit rating with its positive outlook is unaffected by today's announcement.

RATINGS RATIONALE

Moody's initiated the rating review of Denizbank in March 2012 in the context of a range of rating actions relating to a number of Turkish financial institutions whose standalone credit assessments are currently positioned above the sovereign debt rating, which in the case of Turkey is Ba2, with a positive outlook.

Today's announcement of the extension of the review follows the recent downgrade of DCL's BFSR and reflects Moody's assumption that subsidiaries are always likely to be partially affected by changes in parents' creditworthiness and that the credit quality of parent groups and their subsidiaries are typically interlinked. The rating review will therefore also focus on any potential adverse consequences for Denizbank from the weak creditworthiness of DCL (Baa2/P-2 negative; E/caa1 stable). The review will therefore assess the relationship between the two. Moody's recognises the independence of Denizbank from the group; as per audited consolidated 2011 BRSA financials, Denizbank has a low dependence on funding from Dexia Group comprising 82 basis points (bps) of its consolidated balance sheet in the form of Tier 2 capital, down from 210 bps following the sale of Dexia Bank Belgium SA (D/ba2, A3 review direction uncertain; P-1 review for downgrade) by Dexia Group to the government of Belgium in October 2011. Moody's also notes that Dexia has publicly stated to target a sale of its majority stake in Denizbank.

Moody's review of Denizbank's BFSR will continue to focus on the following main areas:

(i) The linkage between the credit profile of the bank and the Turkish sovereign, thereby particularly taking into account (a) the extent to which the entity's business depends on the domestic macroeconomic and financial environment; (b) the degree of reliance on market funding (which is typically more confidence-sensitive); and (c) direct or indirect exposures to domestic sovereign debt.

(ii) The positioning of Denizbank's standalone credit assessment relative to DCL's standalone profile taking into account (a) the degree of interlinkages between Denizbank and Dexia Group; (b) the extent to which a possible default of DCL might have credit-negative implications for Denizbank's credit profile and franchise; and (c) regulatory barriers in Turkey that restrict Dexia Group from using -- at its discretion -- Denizbank's resources.

Finally, the review will encompass Moody's assumptions for systemic support from Turkey as a potential source for rating uplift from the standalone credit profile, which is likely to be positioned at or below the sovereign rating at the conclusion of the review. Denizbank's ratings currently do not incorporate rating uplift from parental support.

WHAT COULD MOVE RATINGS UP/DOWN

Moody's believes there is little likelihood of any upward rating pressure on the BFSR and the GLC deposit ratings, captured by their review for downgrade placements.

The most important rating drivers are: (i) the level of cross-border diversification of Denizbank's operations; (ii) the level of balance-sheet exposure to domestic sovereign debt, compared with the bank's capital base; (iii) franchise resilience and intrinsic strength within the operating environment of Turkey; (iv) a re-assessment of how the weakened financial strength of DCL and Dexia Group may affect the subsidiary's standalone credit profile; and (iv) the assumptions for parental or systemic support available in case of need.

PRINCIPAL METHODOLOGIES

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: Global Methodology published in March 2012. 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.

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.

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 be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com 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.

Arif Bekiroglu
Asst Vice President - Analyst
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's maintains review for downgrade of Denizbank's C- BFSR
No Related Data.

 

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