Madrid, June 14, 2016 -- Moody's Investors Service has today affirmed Banco Comercial Portugues,
S.A.'s (BCP) long-term deposit and senior debt ratings
at B1. At the same time, the rating agency has upgraded:
(1) The bank's baseline credit assessment (BCA) and adjusted BCA to b3
from caa1; (2) the bank's subordinated programme ratings to
(P)Caa1 from (P)Caa2; (3) the bank's preference shares to Caa3(hyb)
from Ca(hyb); and (4) the bank's long-term Counterparty Risk
Assessment (CR Assessment) to Ba2(cr) from Ba3(cr). The outlook
on the long-term deposit ratings remains stable and the outlook
on the senior debt ratings has been changed to negative.
BCP's Not Prime short-term deposit and (P)NP short-term
programme ratings were unaffected by today's rating action as well as
the short-term CRA of Not-Prime(cr).
The upgrade of BCP's standalone BCA reflects the improvement of
the bank's financial performance from previous very weak levels,
notably in terms of profitability and capital. Moody's views
that the bank continues to display a modest risk-absorption capacity
but the likelihood that it would require external support to recapitalize
has diminished on the back of a weak but improving credit profile.
The affirmation of BCP's long-term deposit and senior debt
ratings reflects: (1) The upgrade of the standalone BCA to b3;
and (2) the outcome of Moody's Advanced Loss Given Failure (LGF) Analysis
after incorporating the bank's balance sheet structure at end-December
2015 and its near-term funding plan.
Today's rating action does not incorporate the impact of a potential
acquisition of Novo Banco, S.A (Caa1/Caa1 developing;
caa2), in which BCP has publicly stated that it is interested.
Moody's notes that, as of today, BCP is not allowed
to make any acquisition and that the European Commission needs to lift
this ban before the bank formally presents a bid for Novo Banco.
In case BCP finally receives all relevant authorizations and launches
a formal offer for Novo Banco, Moody's will assess the implications
of such a transaction to the credit profile of BCP.
A list of affected ratings can be found at the end of this press release.
RATINGS RATIONALE
---RATIONALE FOR UPGRADING THE BCA
The upgrade of BCP's BCA to b3 from caa1 reflects the bank's improved
financial performance from very weak levels, notably in terms of
profitability and capital. At end-December 2015, BCP
reported a net profit of EUR361 million, equivalent to 0.5%
of tangible assets, which represents a major improvement in its
credit profile given the large losses booked in 2012-2014.
This improvement was mainly driven by the recovery of the Portuguese operations,
which had been loss making over the past three years. This trend
is expected to continue in 2016 as shown by its Q1 2016 results that provided
a net profit of EUR83 million, albeit the bank's profitability
ratios are expected to remain at modest levels. Moody's expects
BCP's operating revenues to remain challenged by Portugal's
very modest growth economic prospects (i.e. the rating agency
expects GDP growth to be 1.5% in 2016 and 1.8%
in 2017), the low interest rates and persistent subdued business
volumes. However, Moody's also considers that BCP's
stabilizing asset risk trends are likely to translate into a gradual decline
of provisioning costs from past very high levels, which should benefit
bottom line profitability.
In upgrading the bank's BCA, Moody's has also incorporated
BCP's improved capital buffers, namely driven by the continued
balance sheet deleveraging and regained profitability. Moody's
adjusted Tangible Common Equity (TCE) / Risk-Weighted Assets (RWAs)
ratio reached 6.6% at end-March 2016 broadly in line
with the level reported at end-December 2015. This ratio
should be further enhanced after incorporating the benefits from the merger
of its majority-owned Angolan subsidiary with another domestic
player, that took place in April 2016 and has led to the deconsolidation
of these operations.
From a regulatory perspective, the bank's capital ratios have
also improved. On a pro-forma basis (including the impact
of the merger in Angola), BCP reported a phased-in Common
Equity Tier 1 (CET 1) ratio of 13.2% at end-March
2016, which compares to 11.6% a year earlier.
The bank's pro-forma fully loaded CET 1 ratio increased to
10.1% at end-March 2016 from 8.9% a
year earlier.
Despite the mentioned improvements, Moody's notes that BCP's b3
BCA also reflects the bank's very weak asset risk profile.
BCP displays a very high stock of problematic exposures, which despite
stabilizing continue to challenge the bank's credit profile.
At end-March 2016, the bank reported problematic assets (measured
as credit-at-risk loans and foreclosed real estate assets)
of 13.8%, indicating the existing balance sheet pressure
which the bank faces.
BCP still has to address the repayment of EUR750 million of the contingent
capital securities (CoCos) that it received from the Portuguese government
in 2012, which needs to be completed before mid-2017.
This will have an impact on BCP's regulatory capital ratios,
but Moody's expectation is that the bank will manage to meet prudential
capital requirements set up for next year. SREP requirements have
not been publicly disclosed for BCP; the bank will also have to comply
with an additional 1% CET1 buffer (as a systemic institution in
Portugal) from January 2017 onwards.
Overall, Moody's views that BCP's risk-absorption
capacity is very modest when compared to other large European banks.
However, given the stabilizing asset risk and improved profitability
trends, the rating agency expects that the bank will be able to
meet forthcoming additional capital buffers without requiring any external
support.
---RATIONALE FOR AFFIRMING THE LONG-TERM DEPOSIT
AND SENIOR DEBT RATINGS
The affirmation of BCP's long-term deposit and senior debt ratings
at B1 reflects: (1) The upgrade of the bank's BCA and adjusted BCA
to b3 from caa1; (2) the result from the rating agency's Advanced
Loss-Given Failure (LGF) analysis which results in one notch of
uplift for the deposit and senior debt ratings; and (3) Moody's assessment
of moderate probability of government support for BCP, which results
in an unchanged further one notch of uplift for both the deposit and the
senior debt ratings.
Taking account of the bank's balance sheet structure at end-December
2015 and its near term funding plan, the rating agency's LGF Analysis
indicates that the bank's deposits and senior debt are likely to face
low loss-given failure, due to the loss absorption provided
by subordinated debt, as well as the volume of deposits and senior
debt themselves. This results in a Preliminary Rating Assessment
(PRA) of b2 for deposits and senior debt, one-notch above
the BCA. This is lower than under the previous analysis,
which was based on data as of end June 2015 and resulted in a two notch
uplift from the BCA, because the bank has since amortized a significant
volume of debt instruments, which have reduced the loss absorption
for deposits and senior debt liabilities issued by the bank.
---RATIONALE FOR UPGRADING THE CR ASSESSMENT
As part of today's rating action, Moody's has also upgraded to Ba2(cr)
from Ba3(cr) the long-term CR Assessment of BCP, four notches
above the adjusted BCA of b3.
The upgrade of the CR Assessment follows the upgrade of BCP's BCA to b3
from caa1. The CR Assessment is driven by standalone assessment
and by the considerable amount of subordinated instruments likely to shield
counterparty obligations from losses, accounting for three notches
of uplift relative to the BCA, as well as one notch of government
support, in line with the agency's support assumptions on the bank's
deposits and senior debt.
---RATIONALE FOR THE OUTLOOK
The outlook on the deposit ratings is stable. This reflects Moody's
view that BCP's credit profile will remain resilient despite persistent
challenges stemming from the weak operating environment in the countries
in which the group operates, namely Portugal.
The outlook on the senior debt ratings is negative, reflecting the
downward pressure that could develop if the bank does not achieve Moody's
expectation regarding its liability structure and balance sheet deleveraging,
which could result in higher loss given failure for this type of debt.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Upward pressure on BCP's BCA could be driven by: (1) Stronger TCE
levels; (2) a material improvement in its asset risk profile;
and (3) a sustainable recovery in the bank's recurring earnings.
Downward pressure on the bank's BCA could develop as a result of:
(1) A reversal in current asset risk trends with an increase in the stock
of nonperforming loans (NPLs) and/or other problematic exposures;
and (2) a weakening of BCP's internal capital-generation and risk-absorption
capacity as a result of deteriorating profitability levels.
As the bank's debt and deposit ratings are linked to the standalone BCA,
any change to the BCA would likely also affect these ratings.
BCP's deposit and senior debt ratings could also change due to movements
in the loss-given failure faced by these securities.
In addition, any changes to our considerations of government support
could trigger downward pressure on the bank's deposit and debt ratings.
LIST OF AFFECTED RATINGS
Issuer: Banco Comercial Portugues, S.A.
..Upgrades:
....Adjusted Baseline Credit Assessment,
upgraded to b3 from caa1
....Baseline Credit Assessment, upgraded
to b3 from caa1
....Long-term Counterparty Risk Assessment,
upgraded to Ba2(cr) from Ba3(cr)
....Subordinate Medium-Term Note Program,
upgraded to (P)Caa1 from (P)Caa2
....Pref. Stock Non-cumulative,
upgraded to Caa3(hyb) from Ca(hyb)
..Affirmations:
....Senior Unsecured Medium-Term Note
Program, affirmed (P)B1
....Senior Unsecured Regular Bond/Debenture,
affirmed B1, outlook changed to Negative from Stable
....Long-term Deposit Ratings,
affirmed B1 Stable
..Outlook Actions:
....Outlook changed to Stable(m) from Stable
Issuer: BCP Finance Bank, Ltd.
..Upgrades:
....Backed Subordinate Medium-Term
Note Program, upgraded to (P)Caa1 from (P)Caa2
....Backed Subordinate Regular Bond/Debenture,
upgraded to Caa1 from Caa2
..Affirmations:
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)B1
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed B1, outlook changed to Negative from Stable
..Outlook Actions:
....Outlook changed to Negative from Stable
Issuer: BCP Finance Company
..Upgrades:
....Backed Subordinate Shelf, upgraded
to (P)Caa1 from (P)Caa2
....Backed Pref. Stock Non-cumulative,
upgraded to Caa3(hyb) from Ca(hyb)
..Outlook Actions:
....No Outlook
Issuer: Banco Comercial Portugues, SA, Macao Br
..Upgrades:
....Long-term Counterparty Risk Assessment,
upgraded to Ba2(cr) from Ba3(cr)
....Subordinate Medium-Term Note Program,
upgraded to (P)Caa1 from (P)Caa2
..Affirmations:
....Senior Unsecured Medium-Term Note
Program, affirmed (P)B1
....Long-term Deposit Rating,
affirmed B1 Stable
..Outlook Actions:
....Outlook remains Stable
Issuer: Banco Comercial Portugues, SA, Madeira
..Upgrades:
....Long-term Counterparty Risk Assessment,
upgraded to Ba2(cr) from Ba3(cr)
..Outlook Actions:
....No Outlook
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 Jose Mori
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
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 Banco Comercial Portugues' B1 deposit and senior debt ratings, following upgrade of standalone BCA to b3
