Madrid, June 10, 2016 -- Moody's Investors Service has today affirmed Banco Bilbao Vizcaya,
S.A.'s (BBVA) long-term bank deposit ratings
at A3, short-term deposit ratings at P-2, senior
unsecured debt and medium-term note (MTN) program ratings at Baa1/(P)Baa1,
subordinated debt and MTN program ratings at Baa3/(P)Baa3, and short-term
commercial paper rating and other short-term obligations at P-2/(P)P-2.
At the same time, Moody's has affirmed the bank's baseline credit
assessment (BCA) at baa2, adjusted BCA at baa2, and counterparty
risk assessment (CR Assessment) at Baa1(cr)/P-2(cr).
The outlook on the bank's long-term deposit and senior unsecured
ratings remains stable.
Today's rating action follows the confirmation of BBVA Bancomer,
S.A.'s debt and deposit ratings at A3 with a negative
outlook and the downgrade of its BCA to baa2 from baa1 on 8 June 2016.
(For details on this rating action please see Moody's press release:
Moody's confirms A3 deposits and senior debt ratings of BBVA Bancomer
and Banamex; negative outlook; http://www.moodys.com/viewresearchdoc.aspx?docid=PR_350151).
All other ratings of BBVA and its supported entities have also been affirmed.
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
RATIONALE FOR THE AFFIRMATION OF BBVA'S RATINGS
Today's ratings affirmation follows the conclusion of the review
of the ratings of its Mexican subsidiary (BBVA Bancomer) initiated on
4 April 2016, that concluded on 8 June 2016 with the confirmation
of BBVA Bancomer's debt and deposit ratings at A3, with a
negative outlook, and the downgrade of its BCA by one notch to baa2
from baa1. Today's rating action also takes into account
a lower weighted Macro Profile for BBVA (from 'Strong --'
to 'Moderate +) following the change of Mexico's Macro
Profile on 4 April 2016.
The confirmation of BBVA Bancomer's A3 deposit and senior debt ratings
reflects Moody's continued assessment of a very high likelihood
the Mexican government would support this systemically important institution
should it face severe financial stress. In turn, in lowering
BBVA Bancomer's BCA Moody's took into account that this bank,
along with other Mexican banks, faces increased medium-term
tail risks because of the country's less favorable operating environment
stemming from a combination of the oil price shock and the slower than
expected economic growth. At the same time, the structural
reforms adopted in 2013-14, which were expected to deliver
a boost to economic activity, have not provided the anticipated
benefit. While Moody's does not project an economic deceleration,
together these factors have undermined expectations for improved economic
performance and shifted the balance of risks and opportunities for the
country's banking sector to the downside. In this context,
although BBVA Bancomer's recent performance has remained strong,
the bank's historically lower core capitalization relative to other
large Mexican banks and high loan concentrations leave it exposed to a
potential crystallization of rising tail risks.
With only a 12% share of BBVA's loan book, BBVA Bancomer
has been one of the key contributors to the Spanish banking group's bottom
line in the recent past, accounting for close to 50% of profits
at end-March 2016 (up from around one-third pre-crisis)
and mitigating the poor performance of the domestic business in Spain,
particularly between 2012-2014 when it was loss-making.
Since then, BBVA's domestic operations have been gradually
recovering against the backdrop of strong economic growth in Spain (GDP
to grow at 2.9% in 2016 according to Moody's estimates)
resulting into a lower cost of risk alleviating the downward pressure
on earnings from the current low interest rate environment. Although
profits generated domestically remain at weak levels and are below pre-crisis
levels, the trend is for further improvement as asset quality continues
to improve and expected cost synergies start to materialize in the medium-term.
The affirmation of BBVA's ratings reflects Moody's expectation
that the recovery of its domestic franchise should mitigate increased
medium-term downside tail risks for Mexican banks, including
BBVA Bancomer, stemming from the country's less favorable
operating environment. Spain accounted for close to 50%
of the group's loan book but only 12% of its earnings at
end-March 2016 compared to close to 50% pre-crisis
levels.
Along these lines, Moody's notes that BBVA enjoys an ample
geographical diversification that has allowed the group to remain profitable
throughout the recent crisis, despite sizeable losses incurred by
its domestic franchise in the recent past.
The affirmation of BBVA's long-term deposit at A3 and senior unsecured
debt ratings at Baa1 with a stable outlook also reflects: (1) The
result from the rating agency's Advanced Loss-Given Failure (LGF)
analysis which results in an unchanged two notches of uplift for the deposit
ratings and one notch of uplift for the senior debt ratings; and
(2) Moody's assessment of a moderate probability of government support
for BBVA (which nevertheless results in no further uplift given that BBVA's
Preliminary Rating Assessments (PRAs) are already exceeding the sovereign
rating).
RATIONALE FOR AFFIRMING THE CR ASSESSMENT
As part of today's rating action, Moody's has also affirmed at Baa1(cr)/Prime-2(cr)
the CR Assessment of BBVA, one notch above the adjusted BCA of baa2.
The CR Assessment, prior to the sovereign's cap, is positioned
three notches above the adjusted BCA of baa2, based on the cushion
against default provided to the senior obligations represented by the
CR Assessment by subordinated instruments amounting to 17.5%
of tangible banking assets. The CR Assessment is, however,
capped at Baa1(cr). The CR Assessment will not typically exceed
the sovereign's own rating by more than one notch, or two notches
where the adjusted BCA is already above the sovereign rating, which
is not the case for BBVA.
WHAT COULD CHANGE THE RATING UP/DOWN
Upward pressure on BBVA's deposit ratings are dependent on: 1) An
upgrade of the government of Spain (Baa2 stable) as the bank's home country
sovereign given that our current A3 deposit rating already exceeds the
sovereign ratings by two notches and are constrained at that level under
our methodology; together with 2) an LGF outcome resulting in a higher
notching. The Baa1 senior debt rating could be upgraded if:
1) The bank's BCA was upgraded; or 2) a higher notching resulted
from our LGF analysis.
In terms of the BCA, our assessment already incorporates some expected
further improvements in the bank's fundamentals, namely in asset
risk, capital and profitability factors, and as such,
we do not expect to increase the BCA over the medium term. In addition,
any upward pressure on BBVA's BCA is unlikely to materialise as long as
the Spanish government's bond rating remains at Baa2.
Downward pressure on BBVA's BCA could develop from: (1) Inadequate
risk-absorption capacity; (2) evidence of the bank's inability
to withstand our liquidity stress test; (3) a lower share of recurring
earnings; and (4) a turnaround in the currently positive asset-quality
trends and/or any evidence of a weaker-than-anticipated
performance in the bank's international activities, primarily in
Mexico, which is BBVA's largest profit contributor.
The bank's debt and deposit ratings are linked to the standalone BCA;
as such, any change to the BCA would likely also affect these ratings.
BBVA's senior unsecured debt and deposit ratings could also change as
a result of changes in the loss-given-failure faced by these
securities.
Negative pressure on the BCA and in turn on the debt and deposit ratings
could also result from a downgrade of the Spanish government ratings,
which are currently at Baa2 stable.
LIST OF AFFECTED RATINGS
Issuer: Banco Bilbao Vizcaya Argentaria, S.A.
..Affirmations:
....Adjusted Baseline Credit Assessment,
affirmed baa2
....Baseline Credit Assessment, affirmed
baa2
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Long-term Counterparty Risk Assessment,
affirmed Baa1(cr)
....Long-term Issuer Rating,
affirmed Baa1 Stable
....Short-term Deposit Ratings,
affirmed P-2
....Other Short Term, affirmed (P)P-2
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
....Senior Unsecured Medium-Term Note
Program, affirmed (P)Baa1
....Senior Unsecured Shelf, affirmed
(P)Baa1
....Pref. Stock Non-cumulative,
affirmed Ba2(hyb)
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Commercial Paper, affirmed P-2
....Senior Unsecured Regular Bond/Debenture,
affirmed Baa1 Stable
....Long-term Deposit Ratings,
affirmed A3 Stable
..Outlook Actions:
....Outlook remains Stable
Issuer: BBVA Capital Funding Limited
..Affirmations:
.... Backed Subordinate Medium-Term
Note Program, affirmed (P)Baa3
.... Backed Subordinate Shelf, affirmed
(P)Baa3
..Outlook Actions:
....No Outlook
Issuer: BBVA Capital Finance, S.A Unipersonal
..Affirmations:
....Backed Pref. Stock Non-cumulative,
affirmed Ba3 (hyb)
..Outlook Actions:
....No Outlook
Issuer: BBVA Global Finance Ltd.
..Affirmations:
....Backed Other Short Term, affirmed
(P)P-2
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa1
....Backed Subordinate Regular Bond/Debenture,
affirmed Baa3
....Backed Senior Unsecured Shelf, affirmed
(P)Baa1
..Outlook Actions:
....No Outlook
Issuer: BBVA Global Markets B.V.
..Affirmations:
....Backed Other Short Term, affirmed
(P)P-2
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa1
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed Baa1 Stable
..Outlook Actions:
....Outlook remains Stable
Issuer: BBVA International Limited
..Affirmations:
....Backed Pref. Stock Non-cumulative,
affirmed Ba3 (hyb)
..Outlook Actions:
....No Outlook
Issuer: BBVA International Pref S.A. Unipersonal
..Affirmations:
....Backed Pref. Stock Non-cumulative,
affirmed Ba3 (hyb)
..Outlook Actions:
....No Outlook
Issuer: BBVA Senior Finance, S.A. Unipersonal
..Affirmations:
....Backed Commercial Paper, affirmed
P-2
....Backed Other Short Term, affirmed
(P)P-2
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa1
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed Baa1 Stable
..Outlook Actions:
....Outlook remains Stable
Issuer: BBVA Subordinated Capital, S.A. Unipersonal
..Affirmations:
....Backed Subordinate Regular Bond/Debenture,
affirmed Baa3
..Outlook Actions:
....No Outlook
Issuer: BBVA U.S. Senior, S.A.
Unipersonal
..Affirmations:
....Backed Commercial Paper, affirmed
P-2
..Outlook Actions:
....Outlook, changed to No Outlook from
Stable
Issuer: Banco Bilbao Vizcaya Argentaria, SA London Br
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Long-term Counterparty Risk Assessment,
affirmed Baa1(cr)
....Short-term Deposit Rating,
affirmed P-2
....Commercial Paper, affirmed P-2
....Long-term Deposit Ratings,
affirmed A3 Stable
..Outlook Actions:
....Outlook remains Stable
Issuer: Banco Bilbao Vizcaya Argentaria, SA Paris Br
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Long-term Counterparty Risk Assessment,
affirmed Baa1(cr)
....Short-term Deposit Rating,
affirmed P-2
....Deposit Note/CD Program, affirmed
P-2
....Long-term Deposit Rating,
affirmed A3 Stable
..Outlook Actions:
....Outlook remains Stable
Issuer: Banco Bilbao Vizcaya Argentaria,SA, New York
..Affirmations:
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Long-term Counterparty Risk Assessment,
affirmed Baa1(cr)
....Short-term Deposit Ratings,
affirmed P-2
....Long-term Deposit Ratings,
affirmed A3 Stable
..Outlook Actions:
....Outlook remains Stable
Issuer: Banco de Credito Local de Espana, S.A.
..Affirmations:
....Senior Unsecured Medium-Term Note
Program, affirmed (P)Baa1
..Outlook Actions:
....No Outlook
Issuer: BCL International Finance Limited
..Affirmations:
....Backed Senior Unsecured, affirmed
Baa1 Stable
..Outlook Actions:
....Outlook remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Ratings Methodologies 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 certain 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 certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Maria Cabanyes
Senior Vice President
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
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 Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Affirms BBVA'S Ratings; Outlook Stable
