Madrid, February 01, 2013 -- Moody's Investors Service has today affirmed Dexia Sabadell's long-
and short-term deposit ratings at B2/Non-Prime, with
a negative outlook on its long-term rating. At the same
time, Moody's has affirmed the standalone bank financial strength
rating (BFSR) of E, but lowered the equivalent standalone credit
assessment to ca from caa1.
This rating action directly follows the rating action at the parent level,
Dexia Credit Local (DCL, Baa2 negative /Prime-2/E mapping
to a ca on the long-term scale), which is the controlling
owner of Dexia Sabadell (for further details, please refer to Moody's
press release on DCL published on 8 January 2013 http://www.moodys.com/research/Moodys-affirms-Dexia-Credit-Locals-Baa2P-2-ratings-outlook-negative--PR_263138).
Moody's believes that Dexia Sabadell's intrinsic strength
is strongly interlinked with that of its parent DCL, through ongoing
funding support and guarantees.
Following this rating action, Moody's will withdraw the ratings
of Dexia Sabadell for its own business reasons.
RATINGS RATIONALE
-- RATIONALE FOR THE AFFIRMATION OF THE DEBT RATINGS
The affirmation of Dexia Sabadell's long- and short-term
deposit ratings of B2/NP reflects Moody's assessment of a very high probability
of support from DCL, which is itself benefiting from substantial
financial assistance from its shareholders.
Moody's says that Dexia Sabadell's likelihood of parental support stems
from its strong interlinkages with DCL. The parent's capacity to
continue providing support to its subsidiary on a standalone basis is
limited. However, Moody's believes that the government support
incorporated in the parent's debt ratings of Baa2 should be factored into
the ratings of the groups' foreign subsidiaries, including Dexia
Sabadell.
Moody's considers that the state-guaranteed debt scheme of
EUR85 billion implemented for Dexia Group is essential to ensure DCL and
its subsidiaries' ability to service their senior debt over their
prolonged run-off period. This measure, together with
the EUR5.5 billion capital increase for Dexia S.A.
subscribed by Belgium and France on 31 December 2012, confirms the
very strong support from the governments of Belgium, France and
Luxembourg to Dexia Group and Moody's view that they will likely
continue to take all necessary measures to ensure the group's ability
to service its senior debt.
In addition, Moody's also believes that the substantial exposures
of DCL to Dexia Sabadell --through the liquidity support and guarantees
provided -- create a strong incentive to provide funding and capital
support to the entity in the future.
The negative outlook on Dexia Sabadell's B2 long-term deposit
rating reflects the negative outlook on the long-term ratings of
DCL.
-- RATIONALE FOR THE LOWER STANDALONE CREDIT ASSESSMENT
The lowering of the bank's standalone credit assessment to ca from
caa1 primarily reflects Dexia Sabadell's strong credit linkage with DCL,
that continues to justify the alignment of its standalone credit assessment
to that of its parent. In addition, the ca standalone credit
assessment also incorporates the fact that DCL and its subsidiaries will
be managed on a run-off basis, as contemplated in Dexia group's
resolution plan.
Dexia Sabadell's intrinsic strength is strongly interlinked with
that of its parent DCL. The entity is dependent on liquidity support
from DCL, which accounts for the bulk of its funding. Furthermore,
it has several large borrower concentrations that, relative to the
bank's capital, exceed Bank of Spain's regulatory limits.
These excess amounts over regulatory limits are covered by a guarantee
issued by DCL.
In addition, Moody's notes that the following factors continue to
challenge the bank's credit profile: (1) the prolonged run-off
period for DCL and its subsidiaries contemplated in Dexia group's
resolution plan, which will continue to deteriorate Dexia Sabadell's
franchise; (2) weaker asset quality, which will likely deteriorate
further given its exposure to Spanish and Portuguese regions and municipalities;
and (3) pressures on Dexia Sabadell's solvency, in light of the
expected asset-quality deterioration and the high leverage of its
balance sheet, which benefits from the low regulatory risk-weighting
of many of its public-sector assets.
-- RATINGS WITHDRAWAL
Subsequent to this rating action, Moody's will withdraw the
ratings of Dexia Sabadell for its own business reasons.
Please refer to the Moody's Investors Service's Policy for
Withdrawal of Credit Ratings, available on its website, www.moodys.com.
PRINCIPAL METHODOLOGIES
The principal methodology used in this rating was Moody's Consolidated
Global Bank Rating published in June 2012. 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.
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?Vinuela
Analyst
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
Johannes Wassenberg
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 and withdraws Dexia Sabadell's B2/NP ratings; negative outlook