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Rating Action:

Moody´s affirms all of Banco Santander's ratings

02 Aug 2017

Actions to reflect the bank's ability to withstand weaker operating environment in the UK and Brazil

Madrid, August 02, 2017 -- Moody's Investors Service has today affirmed all of Banco Santander S.A. (Spain)'s (Banco Santander) and its supported entities' ratings: (1) the A3/Prime-2 deposit and senior debt ratings; (2) the Baa2 subordinated debt ratings; (3) the Baa2 junior senior unsecured debt ratings; (4) the Ba1(hyb) and Ba2(hyb) preference shares ratings; (5) the bank's baseline credit assessment (BCA) and adjusted BCA of baa1; and (6) its Counterparty Risk Assessment (CR Assessment) of A3(cr)/Prime-2(cr). The outlook for the long-term senior debt and deposit ratings remains stable.

The rating action reflects Moody's assessment of Santander group's resilience amidst weaker operating conditions in two of their key markets, namely the UK and Brazil, which together account for 36% of the group's estimated total assets. Moody's re-assessment of Santander's credit fundamentals follows the recent lowering of the Macro Profiles of the UK and Brazil which reflect weakening operating environments in both countries.

A list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

The affirmation of Banco Santander's standalone BCA at baa1 follows Moody's assessment that Banco Santander's credit fundamentals are resilient to lower Macro Profiles in the UK (https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1083322) and Brazil (https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1082921). On 2 August 2017, Moody's lowered the UK's Macro Profile to Strong+ from Very Strong- and on 24 July 2017, Brazil's Macro Profile was lowered to Moderate- from Moderate. Moody's Macro Profiles reflect the rating agency's assessment of the macro environment in which a bank operates and have a direct bearing on Moody's assessment of the financial profile of the bank.

The lower assessment of both countries' operating environments did not, however, trigger a subsequent negative rating action on Santander's subsidiaries in those countries (Santander UK PLC (Aa3/Aa3 stable, a3) and Banco Santander (Brasil) S.A. (Ba3 stable/(P)Ba1, ba2)). This reflects Moody's belief that both banks are in a position to withstand more challenging operating conditions in their core markets.

The affirmation of Santander's ratings also takes into account the group's leading market positions in several major markets that result in a widely diversified balance sheet. This underpins Santander's sustained profit generation even during periods of severe stress and the bank's low earnings volatility. Moody's expects that Santander's geographical diversification will remain a positive credit driver.

The affirmation of Banco Santander's deposit and senior debt ratings reflects: (1) the affirmation of the bank's standalone BCA at baa1; (2) the outcome of Moody's Advanced Loss-Given-Failure (LGF) analysis that results in two notches of uplift respectively for the deposit and debt ratings; and (3) Spain's sovereign rating of Baa2 stable, which caps Banco Santander's deposit and senior ratings, in turn, at A3, which is two notches above the sovereign rating.

---RATIONALE OF THE CR ASSESSMENTS

As part of today's rating action, Moody's has also affirmed at A3(cr)/Prime-2(cr) the CR Assessment of Banco Santander, one notch above the adjusted BCA of baa1 and reflecting the cushion provided by the volume of bail-in-able debt and deposits (20% of tangible banking assets at end-December 2016), which would likely support operating obligations in resolution. The CR Assessment is capped at A3(cr), two notches above Spain's sovereign rating.

WHAT COULD CHANGE THE RATING UP/DOWN

Upward pressure on Banco Santander's ratings would primarily materialise in the event of an upgrade of the government of Spain as the bank's home country sovereign, given that Moody's current A3 long-term debt and deposit ratings already exceed the sovereign ratings by two notches and are constrained at that level under the rating agency's methodology.

Moody's assessment of the BCA already incorporates some expected further improvement in the bank's fundamentals, and as such the rating agency does not expect to increase the BCA over the medium term. In addition, any upward pressure on Santander's BCA is unlikely to materialise as long as the Spanish government's bond rating remains at Baa2, because the bank's BCA already exceeds the Spanish sovereign rating by one notch.

Banco Santander's current BCA already incorporates Moody's expectation for an improvement in its financial fundamentals. A weakening or reversal in the positive trajectory could, therefore, have negative rating implications.

A downgrade of Spain's government rating could also lead to the downgrade of Banco Santander's BCA and of its deposit and senior unsecured ratings. The bank's debt and deposit ratings are linked to the standalone BCA; as such, any change to the BCA could also affect these ratings.

LIST OF AFFECTED RATINGS

Issuer: Banco Santander S.A. (Spain)

..Affirmations:

....Long-term Counterparty Risk Assessment, affirmed A3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Long-term Bank Deposits, affirmed A3 Stable

....Short-term Bank Deposits, affirmed P-2

....Long-term Issuer Rating, affirmed A3 Stable

....Senior Unsecured Medium-Term Note Program, affirmed (P)A3

....Senior Unsecured Shelf, affirmed (P)A3

....Subordinate Regular Bond/Debenture, affirmed Baa2

....Subordinate Medium-Term Note Program, affirmed (P)Baa2

....Subordinate Shelf, affirmed (P)Baa2

....Junior Senior Unsecured Regular Bond/Debenture, affirmed Baa2

....Junior Senior Unsecured Medium-Term Note Program, affirmed (P)Baa2

....Junior Senior Unsecured Shelf, affirmed (P)Baa2

....Preferred Stock Non-cumulative, affirmed Ba1(hyb)

....Commercial Paper, affirmed P-2

....Adjusted Baseline Credit Assessment, affirmed baa1

....Baseline Credit Assessment, affirmed baa1

..Outlook Action:

....Outlook remains Stable

Issuer: Banco Espanol de Credito, S.A. (Banesto)

..Affirmations:

....Preferred Stock Non-cumulative, affirmed Ba2(hyb) (assumed by Banco Santander, S.A. (Spain))

....No Outlook assigned

Issuer: Banesto Holdings, Ltd.

..Affirmation:

....Backed Preferred Stock Non-cumulative, affirmed Ba2(hyb)

....No Outlook assigned

Issuer: Santander International Products PLC

..Affirmations:

....Backed Senior Unsecured Regular Bond/Debenture, affirmed A3 Stable

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)A3

....Backed Other Short Term, affirmed (P)P-2

....Backed Commercial Paper, affirmed P-2

..Outlook Action:

....Outlook remains Stable

Issuer: Banco Santander, S.A., London Branch

..Affirmations:

....Long-term Counterparty Risk Assessment, affirmed A3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Long-term Deposit Note/CD Program, affirmed (P)A3

....Short-term Deposit Note/CD Program, affirmed (P)P-2

....No Outlook assigned

Issuer: Emisora Santander Espana S.A.U

..Affirmations:

....Backed Senior Unsecured Regular Bond/Debenture, affirmed A3 Stable

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)A3

..Outlook Action:

....Outlook remains Stable

Issuer: Santander Central Hispano International Ltd

..Affirmations:

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)A3

....Backed Other Short Term, affirmed (P)P-2

....Backed Commercial Paper, affirmed P-2

....No Outlook assigned

Issuer: Santander Central Hispano Issuances Ltd.

..Affirmations:

....Backed Subordinate Medium-Term Note Program, affirmed (P)Baa2

....Backed Subordinate Shelf, affirmed (P)Baa2

....No Outlook assigned

Issuer: Santander Commercial Paper, S.A. Unipersonal

..Affirmations:

....Backed Commercial Paper, affirmed P-2

....No Outlook assigned

Issuer: Santander Finance Capital, S.A. Unipersonal

..Affirmations:

....Backed Preferred Stock, affirmed Ba2(hyb)

....Backed Preferred Stock Non-cumulative, affirmed Ba2(hyb)

....No Outlook assigned

Issuer: Santander Finance Preferred, S.A. Unipersonal

..Affirmations:

....Backed Preferred Stock Non-cumulative, affirmed Ba2(hyb)

....No Outlook assigned

Issuer: Santander Int'l Debt, S.A. Unipersonal

..Affirmations:

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)A3

....Backed Other Short Term, affirmed (P)P-2

....Backed Senior Unsecured Regular Bond/Debenture, affirmed A3 Stable

..Outlook Action:

....Outlook remains Stable

Issuer: Santander International Preferred, S.A.U.

..Affirmations:

....Backed Preferred Stock Non-cumulative, affirmed Ba2(hyb)

....No Outlook assigned

Issuer: Santander Issuances S.A. Unipersonal

..Affirmations:

....Backed Subordinate Medium-Term Note Program, affirmed (P)Baa2

....Backed Subordinate Regular Bond/Debenture, affirmed Baa2

....Backed Subordinate Shelf, affirmed (P)Baa2

....No Outlook assigned

Issuer: Santander Perpetual, S.A. Unipersonal

..Affirmations:

....Backed Junior Subordinated Regular Bond/Debenture, affirmed Baa3(hyb)

....No Outlook assigned

Issuer: Santander US Debt, S.A. Unipersonal

..Affirmations:

....Backed Senior Unsecured Regular Bond/Debenture, affirmed A3 Stable

....Backed Senior Unsecured Shelf, affirmed (P)A3

..Outlook Action:

....Outlook remains Stable

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks published in January 2016. 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.

Maria Cabanyes
Senior Vice President
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

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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