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06 Jul 2006
MOODY'S ASSIGNS ISSUER RATING OF A2 TO EFG INTERNATIONAL, AFFIRMS A2/P-1/C+ RATINGS OF EFG BANK AND Baa1 RATINGS OF THE EFG FIDUCIARY CERTIFICATES
First time rating for parent holding; all ratings have stable outlooks
London, 06 July 2006 -- Moody's Investors Service assigned an issuer rating of A2 to EFG
International, the parent company of Swiss-domiciled private
bank EFG Bank. At the same time Moody's affirmed the A2/P-1/C+
ratings of EFG Bank and the Baa1 ratings of the EFG Fiduciary Certificates.
These Tier I capital instruments had initially been issued for the regulatory
benefit of EFG Bank (formerly EFG Private Bank S.A.).
Following the reorganization of the group's legal structure,
these capital securities are now for the regulatory benefit of EFG International.
The outlook for all these ratings is stable.
In assigning the same rating level of A2 for the parent holding company
as for EFG Bank, Moody's said that the rating of EFG International
in relation to the bank took note of the holding company's ability
to service debt from cash flows other than the dividend flows from the
bank, that the holding company has no indebtedness and that it has
substantial equity capital which, at present, is mainly being
used to fund subsidiaries on a senior basis. EFG International
had been established as the holding company of EFG Bank in September 2005
and was publicly listed at the SWX Swiss Exchange in October 2005,
which also enabled it to raise equity capital. It owns, directly,
a number of former subsidiaries of EFG Bank, active in private banking,
including investment management, trustee, advisory and brokerage
activities. Moody's indicated that in its view these directly
held subsidiaries provided a meaningful degree of diversification of cash
flows and assets; on a proforma basis, these directly held
subsidiaries outside EFG Bank's scope of consolidation accounted
for roughly half of EFG International's consolidated net earnings,
pre-provision income and assets under management.
In affirming the A2/P-1/C+ rating of EFG Bank, Moody's
took note of the significant improvement in earnings and recurring earnings
power of the activities which remained in the scope of EFG Bank.
In 2005, on a proforma basis, EFG Bank's assets under
management rose 55% to CHF22.5 billion, revenues increased
22% to CHF253 million, pre-provision income almost
doubled to CHF68.5 million and net profits jumped 307% to
CHF57 million. Moody's went on to indicate that the initial
assignment of the A2/P-1/C+ rating in August 2004 had partly
been based on the key financial metrics of the bank prevailing in mid-2004
which included the benefit of activities since transferred to EFG International.
At the end of 2005, all key financial metrics of the bank,
excluding the activities transferred to EFG International, are superior
to those prevailing in mid-2004 including the activities since
According to Moody's, the A2/P-1/C+ rating of EFG Bank
reflects its successful development, strong business culture and
exclusive focus on private banking services and the sound financial fundamentals.
The bank has a relatively low risk profile and benefits from being fully
integrated in EFG Group's monitoring and risk management structure and
procedures, while remaining legally, financially, commercially
and operationally independent from its sister institution, commercial
bank EFG Eurobank Ergasias (rated A2/P-1/C+).
At the same time, Moody's indicates that EFG Bank's
rating is constrained by (i) the nascent but rapidly growing franchise
value being still mostly represented by the reputation and access to clients
advisors on an individual basis rather than on the basis of the bank's
brand presence (ii) potential challenges relating to an expansion strategy
which involves both external and organic growth ; (iii) efficiency
indicators continuing to be affected, in relation to industry peers,
by ongoing investments in the number of client advisors and the bank's
controls and infrastructure.
The stable outlook for EFG Bank's rating reflects Moody's
expectation that EFG Bank will build up a durable franchise which is less
and less dependent on individual client advisors and that it will continue
to show improvements in earnings and market share in the growing private
banking business. The stable outlook on EFG International's
rating, in relation to that of EFG Bank, is predicated on
the expectation that this listed intermediate holding company will continue
to benefit from diversified cash flows and will show no meaningful indebtedness
or double leverage.
Moody's indicated that developments which could move EFG Bank's
rating up would include strong and sustainable improvement in financial
performance, maintenance of good asset quality and improvements
in the bank's capital levels. Conversely, developments
which could move the bank's and EFG International's rating
down would include any substantial outflow of client funds/erosion of
franchise value, margin pressure, and/or weaker efficiency.
Developments which could lead to EFG International's rating being
negatively notched in relation to the ratings of EFG Bank would be the
incidence of holding company double leverage / significant parent company
indebtedness and a diminished diversification of cash flows either through
the impairment of the dividend payment ability of the units not consolidated
under EFG Bank or the dividends of the bank becoming the dominant source
of cash flow for the holding company.
EFG International, based in Zurich, Switzerland, reported
consolidated total assets of CHF10.8 billion, shareholders'
equity of CHF2,082 million and consolidated client assets under
management of CHF47.3 billion in accordance with IFRS as at 31
December 2005. For the financial year 2005, it reported net
profits of CHF121 million.
EFG Bank based in Zurich, Switzerland, reported consolidated
total assets of CHF6.6 billion, shareholders' equity
of CHF309 million and client assets under management of CHF22.5
billion as at 31 December 2005. For the financial year 2005,
it reported net profit of CHF57 million. EFG International owns
100% of its share capital.
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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