Banif's deposit ratings upgraded to Baa3 and withdrawn
Madrid, December 22, 2015 -- Moody's Investors Service has today taken rating actions on Portuguese
banks Banco Santander Totta S.A. (BST) and BANIF-Banco
Internacional do Funchal, S.A. (Banif), following
the announcement by the Bank of Portugal on 21 December 2015 that,
under the resolution procedures of Banif, the bank will be liquidated
following the sale of major operations, assets and liabilities to
BST.
In more detail, the rating agency has affirmed BST's and its
supported entities' Baa3/Prime-3 deposit ratings, Ba1/Not
Prime senior debt ratings, the (P)Ba2 subordinated debt, the
(P)Ba3 junior subordinated debt, the bank's baseline credit
assessment (BCA) of ba3 and its counterparty risk assessment (CRA) of
Baa3(cr)/Prime-3(cr). The outlook on BST's deposit
and senior debt ratings is stable.
The affirmation of the bank's ratings reflects Moody's views
that BST's credit profile remains resilient after the acquisition
of a large portion of the assets and liabilities from Banif.
At the same time, Moody's has upgraded Banif's deposit
ratings to Baa3/Prime-3 from Caa2/Not-Prime. Subsequently,
Moody's has withdrawn Banif's deposit ratings. The
upgrade and withdrawal have been triggered by the acquisition of Banif's
deposits by BST as part of the transaction.
The rating agency has also downgraded Banif's subordinated debt
rating to C from Ca and the bank's BCA to ca from caa3, prompted
by the Bank of Portugal's announcement that Banif will be liquidated
as part of the resolution of the bank, which was approved in conjunction
with the European authorities. Moody's has also affirmed Banif's
supported entities' backed junior subordinated debt rating and backed
preferred shares at C(hyb).
Banif's long-term Counterparty Risk Assessment (CRA) of B3(cr)
has been placed on review with direction uncertain (from review for downgrade
previously) and its short-term CRA of Not-Prime(cr) on review
for upgrade. The review reflects the continued uncertainties in
relation to the performance of Banif's senior operating obligations
and other contractual commitments. In Moody's view there
is a significant possibility that these have also been assumed by BST
in the context of the transfer of the majority of Banif's assets
and liabilities. Our review will look to establish whether this
was indeed the case.
A list of affected ratings can be found at the end of this press release.
RATINGS RATIONALE
-- RATIONALE FOR THE AFFIRMATION OF BST'S RATIN
Today's affirmation of BST's BCA follows Moody's assessment
of the impact on BST's credit profile of the acquisition of EUR11.1
billion of assets and liabilities from Banif for an amount of EUR150 million.
Despite Banif's very weak financial profile, Moody's
views that BST's significantly stronger financial fundamentals provide
it with sufficient capacity to absorb such an acquisition without a major
deterioration of its credit profile.
In affirming the BCA, Moody's has taken into consideration
the mitigating effect on BST's asset risk profile (post-acquisition)
of the substantial aid measures (EUR2.255 billion) approved by
the European Commission (EC) and granted to Banif by the Portuguese government
in order to support the sale of its assets and liabilities. An
additional buffer of around EUR300 million in the form of a state guarantee
has also been approved by the EC to offset changes in the value of the
portion acquired by BST. Furthermore, Moody's expects
that the impact of the transaction on BST's capital will be at least
partly mitigated by the recently approved EUR300 million capital increase
(provided by BST's parent, Banco Santander S.A.
(A3/A3 positive, baa1)) that will conclude on 30 December 2015.
Moody's also notes that any impact on BST's liquidity and/or
capital position as a consequence of integrating the major operations
of a resolved entity such as Banif, is expected to be ultimately
addressed by its parent in case of need.
Moody's has assessed the impact of BST's acquisition based
on available information. The rating agency will assess any further
impact on the bank's credit profile that could arise once full disclosure
of the transaction is made available, including any additional execution
risk to the integration of Banif's asset and liabilities.
BST's Baa3/Prime-3 deposit ratings and its Ba1/Not Prime
senior debt ratings, with a stable outlook, reflect (1) the
bank's ba3 BCA; (2) the high probability of support from its
parent, Banco Santander, resulting in a two-notch uplift
and an adjusted BCA of ba1; and (3) the result from the rating agency's
advanced loss-given failure (LGF) analysis after considering the
impact of the transaction, leading to one notch of additional ratings
uplift for the deposit ratings and no further uplift for the debt ratings.
The outlook on the deposit and senior debt ratings is stable reflecting
BST's resilient credit profile after the anticipated assumption
of the assets and liabilities acquired from Banif, despite the expected
pressure on some of BST's key financial metrics such as asset risk
and capital.
RATIONALE FOR ACTIONS ON BANIF'S RATINGS
Today's upgrade and withdrawal of Banif's deposit ratings
reflects the fact that these liabilities have been acquired and therefore
fully assumed by BST.
The downgrade of Banif's BCA to ca from caa3 is prompted by the
Bank of Portugal's announcement of the sale of a large part of Banif's
assets and liabilities to BST and the transfer of EUR2.2 billion
of the bank's problematic assets to an asset management vehicle
owned by the Portuguese Resolution fund. According to the Bank
of Portugal, Banif will maintain a very limited set of assets that
will be wound up in the future, as well as the shareholders' positions,
subordinated credit and related entities.
The rating agency has also downgraded Banif's subordinated debt
rating to C from Ca and affirmed the junior subordinated debt rating and
preferred shares at C(hyb). In addition to the above mentioned
aid measures granted by the Portuguese government, the EC has approved
a further EUR422 million of public support to cover the transfer of impaired
assets to the asset management vehicle. The EC approved these measures
in compliance with EU state aid rules; Banif's shareholders
and subordinated debt holders fully contributed to the cost of resolution
reducing the need for state aid, in line with burden-sharing
principles.
Banif's long-term CRA of B3(cr) has been placed on review
with direction uncertain and its short-term CRA of Not-Prime(cr)
on review for upgrade. The review reflects Moody's assessment
that there is a certain likelihood that Banif's operational liabilities
will be transferred to BST as part of the transaction with subsequent
risk mitigating implications for related creditors.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Upward pressure on BST's BCA is unlikely, given the expected
pressures on the bank's credit fundamentals following Banif's
transaction. Upward pressure on the BCA could result once BST completes
the integration and materially improves its key financial metrics,
namely capital and asset risk.
Downward pressure on BST's BCA could develop if the bank's financial
profile deteriorates further than anticipated, as a result of the
Banif deal.
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. Furthermore,
BST's deposit and senior debt ratings could be affected as a result of
an upgrade/downgrade of the standalone BCA of the parent (Banco Santander).
BST's senior unsecured debt and deposit ratings could also change due
to changes in the loss-given failure faced by these securities.
LIST OF AFFECTED RATINGS
Upgrades:
..Issuer: BANIF-Banco Internacional do Funchal,
S.A.
....Long-Term Deposit Rating,
Upgraded to Baa3 stable from Caa2
....Short-Term Deposit Rating,
Upgraded to P-3 from NP
Downgrades:
..Issuer: Banif Finance, Limited
....Backed Subordinate Regular Bond/Debenture,
Downgraded to C from Ca
..Issuer: BANIF-Banco Internacional do Funchal,
S.A.
....Adjusted Baseline Credit Assessment,
Downgraded to ca from caa3
....Baseline Credit Assessment, Downgraded
to ca from caa3
....Subordinate Regular Bond/Debenture,
Downgraded to C from Ca
Affirmations:
..Issuer: Banco Santander Totta S.A.
....Long-Term Deposit Rating,
Affirmed Baa3 stable
....Short-Term Deposit Ratings,
Affirmed P-3
....Adjusted Baseline Credit Assessment,
Affirmed ba1
....Baseline Credit Assessment, Affirmed
ba3
....Short-Term Counterparty Risk Assessment,
Affirmed P-3(cr)
....Long-Term Counterparty Risk Assessment,
Affirmed Baa3(cr)
....Long-Term Senior Unsecured Medium-Term
Note Program , Affirmed (P)Ba1
....Short-Term Senior Unsecured Medium-Term
Note Program, Affirmed (P)NP
....Senior Unsecured Regular Bond/Debenture,
Affirmed Ba1 stable
....Senior Unsecured Commercial Paper,
Affirmed NP
..Issuer: Banco Santander Totta S.A.,
London
....Short-Term Counterparty Risk Assessment,
Affirmed P-3(cr)
....Long-Term Counterparty Risk Assessment,
Affirmed Baa3(cr)
....Long-Term Senior Unsecured Medium-Term
Note Program, Affirmed (P)Ba1
....Short-Term Senior Unsecured Medium-Term
Note Program, Affirmed (P)NP
....Junior Subordinate Medium-Term
Note Program, Affirmed (P)Ba3
....Subordinate Medium-Term Note Program,
Affirmed (P)Ba2
..Issuer: Banif Finance, Limited
....Backed Junior Subordinated Regular Bond/Debenture,
Affirmed C (hyb)
....Backed Pref. Stock Non-cumulative
Preferred Stock , Affirmed C (hyb)
..Issuer: TOTTA (IRELAND) p.l.c.
....Backed Senior Unsecured Commercial Paper,
Affirmed NP
On Review for Upgrade:
..Issuer: BANIF-Banco Internacional do Funchal,
S.A.
....Short-Term Counterparty Risk Assessment,
Placed on Review for Upgrade, currently NP(cr)
On Review Direction Uncertain:
..Issuer: BANIF-Banco Internacional do Funchal,
S.A.
....Long-Term Counterparty Risk Assessment,
Placed on Review Direction Uncertain, currently B3(cr)
Outlook Actions:
..Issuer: Banco Santander Totta S.A.
....Outlook, Remains Stable
..Issuer: Banif Finance, Limited
....Outlook, Changed To No Outlook From
Rating Under Review
..Issuer: BANIF-Banco Internacional do Funchal,
S.A.
....Outlook, Changed To Stable From
Rating Under Review
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy 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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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 Santander Totta's Baa3 deposit ratings on Banif acquisition
