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29 Nov 2000
MOODY'S CONFIRMS Aa3/B RATINGS OF BELGIUM'S KBC BANK N.V. AND THEIR NEGATIVE OUTLOOK; LOWERS TO D THE FINANCIAL STRENGTH RATING OF ITS CZECH BANK SUBSIDIARY CSOB (Baa1/P-2 DEPOSIT RATINGS CONFIRMED)
Approximately EUR12.5 billion of debts are affected.
Paris, November 29, 2000 -- Moody's Investors Service confirmed the Aa3/B long-term and financial
strength ratings of Belgium's KBC Bank NV while maintaining a negative
outlook on these ratings. Moody's also lowered to D from D+
the financial strength rating of KBC's Czech banking subsidiary Ceskoslovenska
Obchodni Banka A.S. (CSOB). Confirmed were KBC's
Prime-1 short-term ratings, CSOB's Baa1/Prime-2
deposit ratings, and also the A1/Prime-1 deposit ratings
of IIB Bank, KBC's Irish bank subsidiary.
The confirmation of KBC's ratings reflects the fact that the Belgian group's
Central and East European expansion - though acquisition of meaningful
banks in the Czech Republic, Hungary, Poland, etc.
- has good strategic potential, while also not having a materially
negative effect on credit fundamentals in the short- to medium-term.
In this respect, the Czech government's transfer last summer to
CSOB of the operations of failed bank Investicni a Postovni Banka,
A.S. (IPB) should not hurt the overall strength of KBC,
and in time should give the Belgian group a firmer footprint in the Czech
financial services market.
Moody's added that KBC preserves a dominant franchise in Flanders -
one of the most affluent and economically dynamic regions in Europe -
and continues to display a moderate risk profile of its business and balance
sheet. However, domestic profitability remains more modest,
in line with the structurally low returns of the banking industry in Belgium.
Nevertheless, the bank should be able, albeit belatedly,
to start realizing some branch distribution-related costs savings
from the Kredietbank/CERA merger added the rating agency. Furthermore,
KBC's focus on wealth management - bancassurance and investment
funds - leads to a more diversified revenue base. The rating
agency appreciated also the bank's strategic refocus in wholesale activities
away from traditional business lending and toward fee-generating
capital market niches like equity derivatives, equities, and
corporate finance for small and mid caps in the Eurozone.
Mitigating these benefits, Moody's said that realizing the full
earnings potential of the bank's strategic refocusing and domestic restructuring
remains a major challenge and implementation will be difficult.
Remarks were also made on the potential hurdles of KBC in forging partnerships
and alliances owing to its current ownership structure. Although
being one of Europe's stronger regional banks, KBC's more moderate
size in a highly consolidated Benelux market (in both banking and insurance)
may hinder its capacity to distribute financial services on a large mass
retail scale. Also, competing in investment banking with
larger firms will also be an uphill challenge. Reflecting these
uncertainties, Moody's said that the outlook for KBC's Aa3 and B
ratings remains negative.
Commenting on the downgrade of CSOB's financial strength rating,
Moody's pointed out the challenges associated with the acquisition of
IPB's operations over the medium-term. Although CSOB is
largely protected from IPB's troubled loan and equity portfolios,
the bank will need to maintain prudent lending standards in the enlarged
group in an increasingly competitive Czech banking environment.
The integration of IPB and transition of the combined group should be
a demanding task that will require further restructuring to achieve adequate
efficiencies and cross-selling effects.
However, despite these challenges facing the new group, Moody's
said that the acquisition of IPB's operations significantly enhances CSOB's
franchise, giving it a strong position in the Czech banking market.
Moody's expects that CSOB will maintain adequate capitalisation,
even though its risk weighted assets should increase over time.
The following rating was lowered:
Ceskoslovenska Obchodni Banka A.S. - bank financial
strength to D from D+.
The following ratings were confirmed:
KBC Bank N.V. - senior debts and bank deposits at
Aa3, subordinated debts at A1, bank financial strength at
KBC International Finance N.V. - senior debts guaranteed
by KBC Bank at Aa3, subordinated debts and junior subordinated debts
guaranteed by KBC Bank at A1;
Cerinvest N.V - senior debts guaranteed by KBC Bank at Aa3,
subordinated debts guaranteed by KBC Bank at A1;
Kreditebank Ifima N.V. - subordinated debts guaranteed
by KBC Bank at A1;
KBC Bank Funding trust I - preferred stock at "a1";
KBC Bank Funding trust II - preferred stock at "a1";
KBC Bank Funding trust III - preferred stock at "a1";
KBC Bank Funding trust IV - preferred stock at "a1";
KBC Bank Funding trust V - preferred stock at "a1";
IIB Bank - long-term deposit at A1.
The following ratings were confirmed:
KBC N.V. - short-term bank deposits at Prime-1;
Kredietbank North America Finance Corporation - commercial paper
guaranteed by KBC Bank N.V. at Prime-1;
Ceskoslovenska Obchodni Banka A.S. - long-term
bank deposits at Baa1, short-term bank deposit at Prime-2;
IIB Bank - short-term deposit at Prime-1.
KBC Bank N.V., headquartered in Brussels, Belgium,
had consolidated assets of 151 billion at end-June 2000.
Headquartered in Prague, Czech Republic, Ceskoslovenska Obchodni
Banka A.S. had consolidated assets of CZK245 billion (7
billion) at end-December 1999.
VP - Senior Credit Officer
Financial Institutions Group
Moody's France S.A.
33 1 53 30 10 47
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
No Related Data.
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