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28 Jun 2010
BFSR of ABN AMRO Bank N.V. downgraded to C-, in line with Fortis bank (Nederland) N.V.
London, 28 June 2010 -- Moody's Investors Service has
today affirmed the Aa3/Prime-1 long-term/short-term
bank deposit and senior unsecured ratings of ABN AMRO Bank N.V.
(ABN). The outlook on the long-term ratings has been revised
to stable from negative. The bank financial strength rating (BFSR)
was downgraded to C- from C (equivalent to a baseline credit assessment
-- BCA -- of Baa1). The outlook on the BFSR was revised
to positive from negative. At the same time, the long-term
bank deposit and senior unsecured ratings of Fortis Bank (Nederland) N.V.
(FBN) were upgraded to Aa3 from A1, whilst the short-term
senior unsecured rating was affirmed at P-1. The outlook
on the long-term ratings has been revised to stable from negative.
FBN's BFSR was affirmed at C- (BCA of Baa1) and the outlook
was revised to positive from negative.
These ratings actions coincide with the anticipated legal merger between
the two banks, which is expected to conclude on 1 July 2010.
On completion of the merger, Fortis Bank (Nederland) N.V.
will cease to exist and will be merged into ABN AMRO Bank N.V..
Upon completion of the legal merger, the ratings of FBN will be
The legal merger represents one of the final steps in the restructuring
of ABN AMRO Holding N.V. following the bank's acquisition
in 2007 by a consortium of three banks (Royal Bank of Scotland Group plc,
Banco Santander SA and Fortis SA), through a special purpose vehicle,
RFS Holdings B.V. In December 2008, the Dutch government
became the direct owner of Fortis's stake in ABN AMRO Group N.V.
following the state bailout of Fortis Bank (Nederland) N.V.
Since 1 April 2010, ABN and FBN have been reorganised under a common
holding company (ABN AMRO Group N.V.), which is fully
owned by the Dutch State. This structure will remain in place following
the legal merger, with ABN AMRO Bank N.V. remaining
the sole operating bank.
The C- bank financial strength rating (BFSR) of both ABN and FBN
(mapping to a BCA of Baa1) reflects the combined bank's enhanced
position within the Dutch banking sector with a balanced business mix
between retail and commercial banking, its moderate risk profile
and the strong capital position. These strengths are counterbalanced
by the ongoing challenges and significant costs associated with the complex
merger process as well as the continued interdependencies (these mainly
relate to IT services and operations that FBN continues to receive from
Fortis Bank SA/NV, which are expected to be closed by end Q3 2010)
as well as certain trade finance transaction processing being received
by ABN AMRO from RBS N.V.), current low profitability
and challenged funding profile of the combined group. In particular,
the group's funding profile is exposed to a significant amount of
short-term funding that needs to be termed out. In October
2008 Fortis Bank (Nederland) N.V. was cut off from intergroup
funding lines following its separation from Fortis group. Initially,
FBN relied on the provision of a short-term facility from the Dutch
state, which was subsequently refinanced using short-term
wholesale funding. As such, FBN currently has a sizable amount
of outstanding short-term funding and a further ?10.5bn
in ECB tenders that need to be refinanced this year. While good
progress has been made in terming out this debt, the combined group
will continue to remain exposed to volatility in wholesale funding markets.
The positive outlook on the C- BFSR reflects Moody's view
that the ongoing separation and integration progress and the substantial
cost reduction programmes should lead to a positive improvement in the
combined group's underlying financial strength.
The Aa3 bank deposit and senior debt ratings reflect that the combined
bank's systemic importance has further increased, as evidenced
by its market shares in lending (28% market share in Dutch corporate
lending) and in deposits (around 20% market share in retail deposits)
and the ongoing Dutch State investment in the combined group (100%
of the ordinary shares). Moody's would expect that the Dutch
State's support will remain extremely high in the medium term until
the bank has further developed its stand-alone strength.
HYBRID DEBT RATINGS AFFIRMED
The rating agency affirmed the Ba2 ratings on the two hybrid securities
currently assumed by ABN AMRO Bank N.V. --
GBP750 million perpetual subordinated upper tier 2 notes with cumulative
deferral language (XS0244754254) and EUR1,000 million perpetual
capital securities with cumulative deferral and ACSM settlement language
(XS0246487457). The ratings on both securities were confirmed at
Ba2 in February 2010, reflecting Moody's assumption that the securities
faced a high probability of coupon deferral. The outlook on these
instruments is stable.
Moody's also affirmed the ratings on the hybrid securities currently
assumed by Fortis Bank (Nederland) and its subsidiary as well as the rating
on the junior subordinated debt programme.
The EUR2 billion 8.75% non-cumulative Mandatory Convertible
Securities (MCS) (ISIN: XS0328920862) jointly issued by Fortis Bank
Nederland (Holding) N.V. (FBNH), Fortis Holdings (now
Fortis Group) and Fortis Bank SA/NV were affirmed at Ba1. The outlook
on this security is stable.
Junior subordinated debt under the EUR 40 billion EMTN note programme
updated as of November 2009 A2 on watch for possible downgrade,
two notch above the adjusted BCA. The outlook on this programme
is positive. The bank's EMTN programme allows for the issuance
of junior subordinated debt. However, FBN has currently no
outstanding junior subordinated debt issued under this programme.
The 6.25% Non-cumulative Non-voting Class
A Series 1 Preference Shares (the Class A1 Preference Shares) (ISIN:
GB0057047275) were affirmed at Baa3, two notches below FBN's Adjusted
BCA. The outlook on this security is stable.
For further details on these securities, please refer to our Press
Release "Moody's concludes its review on hybrid securities ratings
for Fortis Bank Nederland N.V. and its subsidiaries",
published on 3rd March 2010.
The principal methodologies used in rating these issuers were "Bank Financial
Strength Ratings: Global Methodology" (February 2007) and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology" (March 2007), which can be found at www.moodys.com
in the ratings Methodologies Sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating these issuers can also be found in
the Rating Methodology Sub-directory on Moody's website.
The principal methodologies used in rating hybrid securities of Fortis
Bank Nederland are "Moody's Guidelines for Rating Bank Hybrid Securities
and Subordinated Debt", November 17, 2009, and "Frequently
Asked Questions: Moody's Guidelines for Rating Bank Hybrid Securities
and Subordinated Debt", November 17, 2009,
The last rating action on ABN AMRO Bank N.V. was on 5 February
2010 when new debt and deposit ratings were assigned to the 'new'
ABN AMRO Bank N.V. following the completion of the legal
separation of the bank from RFS Holdings B.V.
The last rating action on Fortis Bank (Nederland) N.V. was
on 3 March 2010 when Moody's Investors Service concluded its review
on the ratings of certain hybrid securities in line with its revised Guidelines
for Rating Bank Hybrids and Subordinated Debt published in November 2009.
Both ABN AMRO Bank N.V and Fortis Bank (Nederland) N.V.
are headquarter in Amsterdam, The Netherlands. With combined
total assets at end 2009 of ?392bn, the combined entity would
be the third largest bank in The Netherlands.
Senior Vice President
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's affirms ABN AMRO Bank at Aa3; upgrades Fortis Bank (Nederland) to Aa3
No Related Data.
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