Madrid, October 21, 2019 -- Moody's Investors Service ("Moody's") has today
affirmed Banca March S.A.'s (Banca March) deposit ratings
at A3/Prime-2. The outlook on the long-term deposit
ratings remains stable. The rating agency has also affirmed the
bank's (1) Baseline Credit Assessment (BCA) and Adjusted BCA at baa2;
(2) Counterparty Risk Assessment (CR Assessment) at A3(cr)/Prime-2(cr);
and (3) Counterparty Risk Rating (CRR) at A2/Prime-1.
The affirmation of Banca March's ratings reflects the bank's solid credit
profile, with solvency metrics that rank among the strongest within
Spanish rated banks, and its solid liquidity position underpinned
by a high availability of liquid assets. The rating affirmation
also takes into account the change in consolidation method applied to
the group's investment vehicle Corporacion Financiera Alba (Alba),
which since end-2018 consolidates through the equity method having
traditionally consolidated globally.
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
--- RATIONALE FOR AFFIRMATION OF BANCA MARCH'S RATINGS
WITH A STABLE OUTLOOK
The affirmation of Banca March's BCA at baa2 reflects the bank's solid
credit profile, with solvency metrics that rank among the strongest
in the Spanish banking sector. In terms of asset risk, the
bank's problem loan ratio of 2.3% at end-June
2019 compares very favourably with the system average of 5.1%.
The bank also performs stronger than the system in terms of repossessed
real estate assets, and its nonperforming assets ratio, which
combines problem loans and real estate assets, stood at 4.3%
as of end-June 2019, materially below the system average
of 8.2% as of the same date. The bank's low
asset risk profile is further reinforced with its strong loss absorption
capacity measured through the Texas ratio (nonperforming assets/shareholders'
equity + loan-loss reserves + real estate reserves),
which, at 18% at end-June 2019, ranks among
the lowest within Spanish rated banks.
Banca March also shows strong profitability metrics relative to domestic
peers. The bank's net income/tangible assets stood at 0.7%
in 2018, which compares with a domestic system average of 0.5%.
Fee and commission income, principally generated from the provision
of securities services, asset management and insurance activities,
constitute the bulk of the bank's revenues, ensuring a certain
degree of stability in the bank's top-line earnings in a
context of low interest rates and declining net interest income.
Earnings will moreover be less reliant on Alba's profits,
inherently more volatile, after the bank lower to 15% its
stake in the group's investment vehicle at end-2018.
The affirmation of the bank's BCA also takes into account the change
in the bank's consolidation perimeter at end-2018,
whereby its stake in the investment vehicle Alba consolidates through
the equity method rather than global consolidation previously.
The change in consolidation perimeter, which translated into a decline
in consolidated assets of approximately €3 billion, negatively
affected the bank's regulatory capital owing to the deduction of
Alba's investment from the capital base. Despite a decline
of almost 500 basis points, the bank's CET1 ratio of 16.0%
as of the end of 2018 still ranks among the strongest in the Spanish banking
system.
In addition, Banca March enjoys a strong liquidity position,
with customer deposits covering the majority of the bank's funding needs
(76% at end-2018) and a high availability of liquid assets,
representing 38% of the bank's tangible banking assets as
of end-2018. At 85% as of the same date, Banca
March shows one of the lowest loan-to-deposit ratios among
Spanish peers.
Banca March's family ownership and family involvement in management
positions are key governance considerations for Banca March, because
they expose the bank to specific risk resulting from conflicts between
the bank and family interest. However, Moody's acknowledges
the solid track record of the institution, supporting the view that
governance risks are properly captured in the assessment of the bank's
financial profile.
The affirmation of Banca March's long-term deposit ratings at A3
reflects: (1) the affirmation of the bank's baa2 BCA; (2) the
result from the rating agency's Advanced LGF analysis leading to two notches
of uplift for the deposit ratings; and (3) Moody's assessment of
a low probability of government support for Banca March that results in
no uplift for the deposit ratings. The short-term deposit
ratings have been affirmed at Prime-2.
---RATIONALE FOR THE STABLE OUTLOOK
The outlook on Banca March's long-term deposit ratings is stable,
reflecting Moody's view that the current ratings already capture the expected
performance of the bank's financial fundamentals.
WHAT COULD CHANGE THE RATING - UP
Banca March's BCA could be upgraded primarily as a consequence of a further
material improvement in terms of asset risk. Because the bank's
deposit ratings are linked to its BCA, a positive change in its
BCA would likely affect its ratings.
The deposit ratings could also be upgraded if the bank changes its current
liability structure, indicating that these securities would face
a lower loss given failure.
WHAT COULD CHANGE THE RATING - DOWN
Downward pressure on the bank's BCA could result from (1) a deterioration
in the bank's asset quality or profitability indicators; or (2) the
bank's failure to maintain an adequate liquidity profile, mainly
in terms of the deposit funding base.
The deposit ratings could also be downgraded because of changes in the
bank's liability structure, indicating a higher loss given failure
for these securities.
LIST OF AFFECTED RATINGS
Issuer: Banca March S.A.
..Affirmations:
....Long-term Counterparty Risk Rating,
affirmed A2
....Short-term Counterparty Risk Rating,
affirmed P-1
....Long-term Bank Deposits,
affirmed A3, outlook remains Stable
....Short-term Bank Deposits,
affirmed P-2
....Long-term Counterparty Risk Assessment,
affirmed A3(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Baseline Credit Assessment, affirmed
baa2
....Adjusted Baseline Credit Assessment,
affirmed baa2
..Outlook Action:
....Outlook remains Stable
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, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
Alberto Postigo
VP - Senior Credit Officer
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
Client Service: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
