MOODY'S UPGRADES TO Aa3 THE LONG-TERM DEPOSIT RATING OF ASLK-CGER BANK; CONFIRMS BANK FINANCIAL STRENGTH RATING AT C+
London, 09-18-98 -- Moody's Investors Service upgraded the long-term deposit rating of ASLK-CGER Bank N.V. to Aa3 from A1. The bank's C+ financial strength rating and Prime-1 short-term deposit rating were confirmed. These rating actions conclude a review initiated in May 1998 following the announcement of a link-up between G‚n‚rale de Banque and the Fortis Group, the majority-owner of ASLK-CGER Bank, to combine their banking activities. The rating upgrade reflects ASLK-CGER Bank's forthcoming merger into G‚n‚rale de Banque (rated Aa3/Prime-1/B).
After the successful conclusion of a share exchange offer operation last June, Fortis A.G. now holds 98.2% of G‚n‚rale de Banque. The Fortis Group (not rated by Moody's) presently owns 75% of ASLK-CGER Bank. Following the recent approval by the Belgian Parliament, the Kingdom of Belgium has committed to sell its remaining 25% participation to the Fortis Group before year-end.
Following its recent acquisition of G‚n‚rale de Banque, the Fortis Group is restructuring its activities by business lines in contrast to its present geographical breakdown. G‚n‚rale de Banque will become the parent bank of the two groups' combined banking activities, said Moody's. As a result, G‚n‚rale de Banque and ASLK-CGER Bank will merge in 1999. The expanded G‚n‚rale de Banque resulting from the merger will enjoy a stronger competitive position due to large market shares in Belgium across all business segments (approximately a quarter of the market as a whole).
In Belgium, the merger should also provide opportunities for both revenue enhancements and economies of scale, added Moody's. Revenue enhancements are expected mainly from cross-selling between the two merging banks, especially in the field of "bancassurance" where the ASLK-CGER Group is the leader. Economies of scale should come principally from the rationalization of the two banks' domestic networks. In this respect however, social, political and cultural impediments are likely to limit the scope of potential cost savings as well as delay the realization of cost benefits over time. Furthermore, the integration of the numerous and varied entities which compose the two banks continues to represent a major challenge at a time when management efforts are also required to keep pace with the rapidly-evolving European banking market on the eve of EMU.
The financial profile of the expanded G‚n‚rale de Banque should be characterised by adequate profitability, sound asset quality and good capital adequacy. Moody's added that its rating outlook is stable based on the expectation that the enlarged G‚n‚rale de Banque Group will pursue a strategy of strengthening its profitability and financial fundamentals while avoiding unduly high business and balance-sheet risks.
The following ratings were upgraded:
ASLK-CGER Bank – long-term bank deposits to Aa3 from A1;
ASLK-CGER Ifico – senior debt guaranteed by ASLK-CGER Bank to Aa3 from A1, senior subordinated debt guaranteed by ASLK-CGER Bank to A1 from A2 and junior subordinated debt guaranteed by ASLK-CGER Bank to A2 from A3;
The following ratings were confirmed:
ASLK-CGER Bank – short-term bank deposits at Prime-1 and bank financial strength at C+. This rating will be withdrawn when CGER merges with G‚n‚rale de Banque;
ASLK-CGER Ifico – commercial paper guaranteed by ASLK-CGER Bank at Prime-1;
ASLK-CGER Bank, headquartered in Brussels, Belgium, had BEF2,807 billion (about US$76 billion) in total assets at end-December 1997.
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