Ba1 rating assigned to junior senior unsecured notes
Paris, May 21, 2019 -- Moody's Investors Service ("Moody's") today affirmed the Baa1 long-term
senior unsecured debt and deposit ratings of NIBC Bank N.V.
(NIBC). The outlook was changed to positive from stable.
The rating agency also affirmed NIBC's standalone baseline credit assessment
(BCA) and adjusted BCA of baa3, its short-term ratings of
Prime-2, its subordinated debt rating of Ba1, its preference
stock rating of Ba2(hyb), and long- and short-term
Counterparty Risk Ratings and Counterparty Risk (CR) Assessments of A3/Prime-2
and A3(cr)/P-2(cr), respectively.
Concurrently, Moody's assigned a Ba1 rating to the €300
million long-term non-preferred senior notes of NIBC issued
on 9 April 2019, and a (P)Ba1 rating to NIBC's long-term
non-preferred senior debt programme. These rating actions
follow the enactment on 14 December 2018 of the Dutch law creating a new
category of debt for Dutch credit institutions with statutory qualification
as non-preferred senior obligations for EU's Minimum Requirement
for own funds and Eligible Liabilities (MREL).
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
NIBC's BCA of baa3 reflects the bank's niche franchise, which focuses
on lending to certain sectors, some of which Moody's considers
to be particularly cyclical (e.g. offshore energy,
shipping and commercial real estate). Although partly mitigated
by a good risk management, sound asset performance since 2012 and
a reduction in single name exposures over the past few years, NIBC's
asset quality and business model are naturally more dependent on the fortunes
of its chosen segments than some more diversified banks. NIBC's
BCA is also constrained by its still high reliance on confidence-sensitive
wholesale funding, despite reduced use of short-term and
unsecured debt and the improvements gained from a larger retail deposit
base. Capitalisation is sound as underpinned by a CET1 ratio of
20.6% at year-end 2018, even though this could
decline with forthcoming dividend payments. The bank's profitability
has materially improved since 2013, primarily thanks to higher net
interest margins through an increase in lending spreads and a decrease
in funding costs.
The Baa1 long-term senior unsecured debt and deposit ratings incorporate
(1) the bank's BCA of baa3; (2) a two-notch uplift from Moody's
Advanced Loss Given Failure (LGF) analysis; and (3) the rating agency's
assumption of a low probability of government support from the Government
of the Netherlands (Aaa stable).
The positive outlook on the senior unsecured and deposit ratings reflects
Moody's view that the ratings could be upgraded if NIBC is able
to sustain its current level of profitability and capitalisation over
the coming 18 months while preserving sound asset performance and robust
liquidity.
Moody's Advanced LGF analysis indicates likely high loss severity
for the junior senior unsecured notes, subordinated debt instruments
and cumulative preference stock in the event of the bank's failure,
leading to a position one notch below the bank's adjusted BCA.
Moody's rates the cumulative preference stock Ba2(hyb), a
further notch below the adjusted BCA, reflecting the additional
risk of coupon suspension ahead of failure.
The junior senior class of debt (formally known as non-preferred
senior debt) has been specifically created by the Dutch government in
order to allow banks to issue a class of debt which is both senior to
regulatory capital instruments and junior to other senior obligations,
facilitating loss-absorption via a debt conversion or write-down
of the junior senior notes in a resolution. Given that the very
purpose of the junior senior notes is to provide additional loss absorption
and improve the ability of authorities to conduct a smooth resolution
of troubled banks, government support for these instruments is unlikely
in Moody's view and the agency therefore attributes only a low probability
to a scenario where the government would support this debt class.
As a result there is no further uplift from government support.
WHAT COULD CHANGE THE RATING UP/DOWN
NIBC's BCA could be upgraded if the bank is able to sustain its
current level of profitability and capitalisation while preserving sound
asset performance and robust liquidity. A positive change in the
BCA would likely lead to an upgrade of all ratings. The deposit,
senior unsecured debt and junior senior unsecured debt ratings could also
be upgraded if the loss-given-failure of these classes of
debt were to decrease significantly as a result of the issuance of subordinated
and/or junior senior instruments.
A downgrade of NIBC's ratings could be driven by a lower BCA as
a consequence of a deterioration in asset quality, notably in cyclical
corporate sectors such as shipping or oil and gas. The BCA could
also be downgraded if the bank's liquidity or funding structure
were to deteriorate. The senior unsecured debt could also be downgraded
as a result of a material decrease in the instrument's volume,
leading to higher loss-given-failure for this debt category.
LIST OF AFFECTED RATINGS
Issuer: NIBC Bank N.V.
..Assignments:
....Junior Senior Unsecured Regular Bond/Debenture,
assigned Ba1
....Junior Senior Unsecured Medium-Term
Note Program, assigned (P)Ba1
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A3
....Short-term Counterparty Risk Ratings,
affirmed P-2
....Long-term Bank Deposits,
affirmed Baa1, outlook changed to Positive from 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
baa3
....Adjusted Baseline Credit Assessment,
affirmed baa3
....Senior Unsecured Regular Bond/Debenture,
affirmed Baa1, outlook changed to Positive from Stable
....Senior Unsecured Medium-Term Note
Program, affirmed (P)Baa1
....Subordinate Regular Bond/Debenture,
affirmed Ba1
....Subordinate Medium-Term Note Program,
affirmed (P)Ba1
....Preferred Stock, affirmed Ba2(hyb)
....Commercial Paper, affirmed P-2
....Other Short Term, affirmed (P)P-2
..Outlook Action:
....Outlook changed to Positive from 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 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.
Yasuko Nakamura
VP - Senior Credit Officer
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
