Ratings are assigned following June 2018 update to Moody's Banks rating methodology
Madrid, June 08, 2018 -- Moody's Investors Service has today assigned Counterparty Risk Ratings
to six Portuguese banking groups: Caixa Geral de Depositos,
S.A. (CGD), Banco Comercial Portugues, S.A.
(BCP), Novo Banco, S.A., Banco Santander
Totta S.A. (BST), Banco BPI S.A. (BPI)
and Caixa Economica Montepio Geral, caixa economica bancaria,
S.A. (CEMG).
Moody's Counterparty Risk Ratings (CRR) are opinions of the ability
of entities to honor the uncollateralized portion of non-debt counterparty
financial liabilities (CRR liabilities) and also reflect the expected
financial losses in the event such liabilities are not honored.
CRR liabilities typically relate to transactions with unrelated parties.
Examples of CRR liabilities include the uncollateralized portion of payables
arising from derivatives transactions and the uncollateralized portion
of liabilities under sale and repurchase agreements. CRRs are not
applicable to funding commitments or other obligations associated with
covered bonds, letters of credit, guarantees, servicer
and trustee obligations, and other similar obligations that arise
from a bank performing its essential operating functions.
A full list of the affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
In assigning CRRs to the banks and branches subject to this rating action,
Moody's starts with the banks' adjusted Baseline Credit Assessment
(BCA) and uses the agency's existing advanced Loss-Given-Failure
(LGF) approach that takes into account the level of subordination to CRR
liabilities in the bank's balance sheet and assumes a nominal volume of
such liabilities. In addition, where applicable, Moody's
has incorporated a moderate likelihood of government support for CRR liabilities.
As a result, of the CRRs assigned to the six groups, the CRRs
of four banking groups (CGD, BCP, Novo Banco and BPI) are
three notches higher than their respective adjusted BCAs and the CRRs
of two banking groups (BST and CEMG) are two notches higher.
In all cases the CRRs assigned are equal to or higher than the rated banks'
senior debt ratings. This reflects Moody's view that secured counterparties
to banks typically benefit from greater protections under insolvency laws
and bank resolution regimes than do senior unsecured creditors,
and that this benefit is likely to extend to the unsecured portion of
such secured transactions in most bank resolution regimes. Moody's
believes that in many cases regulators will use their discretion to allow
a bank in resolution to continue to honor its CRR liabilities or to transfer
those liabilities to another party who will honor them, in part
because of the greater complexity of bailing in obligations that fluctuate
with market prices, and also because the regulator will typically
seek to preserve much of the bank's operations as a going concern
in order to maximize the value of the bank in resolution, stabilize
the bank quickly, and avoid contagion within the banking system.
CRR liabilities at these banking groups therefore benefit from the subordination
provided by more junior liabilities, with the extent of the uplift
of the CRR from the adjusted BCA depending on the amount of subordination.
FACTORS THAT COULD LEAD TO AN UPGRADE
As the banks' CRRs are linked to the standalone BCA and the results of
Moody's LGF analysis, any upward change to the BCA and rating
uplift under the LGF analysis would likely also affect these ratings.
The banks' standalone BCAs could be upgraded as a consequence of a sustained
recovery in recurrent profitability levels, while maintaining improving
trends of asset risk indicators, with an ongoing reduction in the
stock of problematic assets. The banks' BCAs could also be upgraded
on the back of stronger Tangible Common Equity (TCE) levels.
The banks' CRRs could also experience upward pressure from movements in
the loss-given-failure faced by these liabilities.
Changes in the banks' liability structure which would indicate a
lower loss severity for senior creditors could result in higher ratings
uplift, except for Novo Banco and BPI . The significant level
of subordination below the CRR liabilities at each of the two banking
groups already provides the maximum amount of uplift allowed under Moody's
rating methodology.
Further, under Moody's methodology, a bank's CRR will
typically not exceed the sovereign rating by more than two notches.
Portuguese banks' maximum achievable CRR is therefore Baa2/Prime-2.
FACTORS THAT COULD LEAD TO A DOWNGRADE
Likewise, as the banks' CRRs are linked to the standalone BCA and
the results of Moody's LGF analysis, any deterioration of
the BCA and lower rating uplift under the LGF analysis would likely also
affect these ratings.
Downward pressure on the banks' BCAs could develop as a result of:
(1) the reversal in current asset risk trends with an increase in the
stock of nonperforming assets; (2) a weakening of banks' internal
capital-generation and risk-absorption capacity as a result
of subdued profitability levels; and/or (3) a deterioration in the
banks' liquidity position.
The banks' CRRs could also experience downward pressure from movements
in the loss-given-failure faced by these liabilities.
Sustained lower volumes of subordinated, senior debt instruments
or junior deposits could result in fewer notches of rating uplift under
the Advanced LGF analysis.
Furthermore, where applicable, Moody's re-assessment
of the likelihood of systemic support from the Government of Portugal
could reduce rating uplift and lead to downgrades of CRR.
LIST OF AFFECTED RATINGS
Issuer: Caixa Geral de Depositos, S.A.
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned Ba1
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Caixa Geral de Depositos, S.A. (Paris)
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned Ba1
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Caixa Geral de Depositos/New York
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned Ba1
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Banco Comercial Portugues, S.A.
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned Ba2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Banco Comercial Portugues, SA, Macao Br
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned Ba2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Banco Comercial Portugues, SA, Madeira
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned Ba2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Novo Banco, S.A.
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned B2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Novo Banco S.A., London Branch
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned B2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Novo Banco S.A., Luxembourg Branch
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned B2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Novo Banco, S.A., Cayman Branch
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned B2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Novo Banco, S.A., Madeira Branch
..Assignments:
....Long-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned B2
....Short-term (Local and Foreign Currency)
Counterparty Risk Rating, assigned NP
Issuer: Banco Santander Totta S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Banco Santander Totta S.A., London
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Banco BPI S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Banco BPI S.A. (Cayman)
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Banco BPI S.A. (Madeira)
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Banco BPI S.A. (Santa Maria)
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned Baa2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned P-2
Issuer: Caixa Economica Montepio Geral, CEB, S.A.
..Assignments:
....Long-term (Local Currency) Counterparty
Risk Rating, assigned B2
....Short-term (Local Currency) Counterparty
Risk Rating, assigned NP
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
June 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.
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 rating analyst and the Moody's legal entity that has issued
the ratings.
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
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
