Baseline Credit Assessment upgraded to baa2 from baa3
Paris, April 11, 2019 -- Moody's Investors Service today affirmed the A2 long-term
deposit rating of AXA Bank Belgium (ABB) and changed the outlook to stable
from negative. Moody's also upgraded ABB's Baseline
Credit Assessment (BCA) to baa2 from baa3 and affirmed its adjusted BCA
of a2. These rating actions follow the change in outlook to stable
from negative on ABB's parent AXA, announced on 5 April 2019
(https://www.moodys.com/research/--PR_1000000281).
A list of affected ratings can be found at the end of this press release.
RATINGS RATIONALE
BCA UPGRADE REFLECTS STRENGTHENED CREDIT METRICS FOLLOWING REFOCUS ON
BELGIUM
Moody's upgrade of ABB's BCA to baa2 reflects the bank's
improved creditworthiness since the completion of its refocus on the Belgium
market, including better asset quality, capitalisation,
profitability and funding profile. The bank's asset quality
is strong given the focus on Belgian residential mortgages (88%
of the loan book at end-June 2018). Problem loans represented
only 1.6% of gross loans at year-end 2017 and loan-loss
impairment charges just six basis points of gross loans in 2017.
The bank's common equity tier 1 (CET1) ratio was 19.7%
at year-end 2017 and, as ABB diminished its provision of
repurchase agreements to group entities, its Tier 1 leverage ratio
improved to 4.3% at year-end 2017 from only 2.8%
three years ago and the use of market funds was considerably reduced.
These strengths are partly mitigated by the bank's low profitability
-- albeit improved and positive since 2015 -- which stems from
ABB's limited operations in Belgium and strained net interest margins
in a low interest rate environment. The bank's business model
is heavily concentrated on its chosen markets, with about three
quarters of its revenues derived from net interest income, making
it particularly exposed to shifts in the dynamics of the Belgian mortgage
and savings business.
Moody's affirmation of ABB's deposit rating of A2 reflects
(1) the upgrade of ABB's BCA to baa2 and (2) the very high probability
of affiliate support from ABB's parent AXA, leading to a three-notch
uplift (previously four notches) and an adjusted BCA of a2. In
addition, the bank's deposits benefit from a moderate loss-given-failure,
given the amount of instruments subordinated to them, and a low
likelihood of government support, owing to its limited systemic
importance in Belgium, according to Moody's.
STABLE OUTLOOK FOLLOWS OUTLOOK CHANGE ON PARENT
The change of outlook to stable from negative on ABB's long-term
deposit rating follows the change of the outlook to stable on AXA.
ABB is fully integrated in the commercial strategy of AXA group's main
insurance companies (Aa3 insurance financial strength rating (IFSR),
stable) and, therefore, benefits from a very high probability
of support from its parent. The stable outlook on ABB's long-term
deposit rating reflects Moody's expectations that ABB's fundamentals
are likely to remain broadly unchanged in the medium term, and its
view that a change of AXA's senior unsecured debt rating would likely
result in a similar change of ABB's adjusted BCA of a2 and its long-term
deposit rating of A2.
WHAT COULD CHANGE THE RATING UP/DOWN
ABB's deposit rating could be upgraded in the event of an upgrade
of AXA's senior unsecured debt rating. In addition,
ABB's deposit rating could be upgraded if ABB's loss-given-failure
on deposits were to fall, should the bank raise material additional
corporate deposits or issue additional senior unsecured or subordinated
debt to external investors.
Conversely, ABB's deposit rating could be downgraded in the
event of a downgrade of AXA's senior unsecured debt rating or if Moody's
were to consider that the probability of support from AXA had reduced,
resulting in a downgrade of ABB's adjusted BCA. ABB's long-term
deposit rating could also be downgraded if the bank's loss-given-failure
on deposits were to increase, should the volume of corporate deposits
decrease materially.
LIST OF AFFECTED RATINGS
Issuer: AXA Bank Belgium
..Affirmations:
....Long-term Counterparty Risk Rating,
affirmed Aa3
....Short-term Counterparty Risk Rating,
affirmed P-1
....Long-term Bank Deposits,
affirmed A2, outlook changed to Stable from Negative
....Short-term Bank Deposits,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed Aa2(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Adjusted Baseline Credit Assessment,
affirmed a2
..Upgrade:
....Baseline Credit Assessment, upgraded
to baa2 from baa3
..Outlook Actions:
....Outlook changed to Stable from Negative
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating 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.
Guillaume Lucien-Baugas
Vice President - Senior Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
