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I AGREE
02 Nov 2016
London, 02 November 2016 -- Moody's Investors Service has today changed the outlook to negative from
stable and affirmed the Ba2 long-term local and foreign-currency
deposit ratings of Getin Noble Bank S.A. (GNB). Concurrently,
the rating agency has affirmed the bank's long-term Ba1(cr) Counterparty
Risk Assessment (CRA) and b1 baseline credit assessment (BCA) and adjusted
BCA.
The bank's short-term Not-Prime deposit ratings and Not-Prime(cr)
CRA are unaffected by today's rating action.
The full list of the affected ratings and rating inputs can be found at
the end of this press release.
RATINGS RATIONALE
The affirmation of GNB's Ba2 deposit ratings and change of the outlook
to negative from stable reflects Moody's assessment of rising downward
pressure on the bank's standalone b1 BCA due to its weakened loss
absorption capacity - problem loans as a percentage of loan loss
reserves and Moody's key capital metric tangible common equity (TCE)
increased to 95% as of H1 2016 from 81% in December 2014.
GNB's deposit ratings continue to receive a two-notch rating
uplift from Moody's Advanced Loss-Given-Failure (LGF) analysis.
GNB's asset quality remains weak at 13.8% of non-performing
loan (NPL, includes defaulted and other impaired loans) ratio of
as of June 2016, albeit little changed from 13.1%
as of December 2014. However, the coverage of these NPLs
by loan loss reserves declined to a low level of 36.2% from
54.1% as of the same dates. As such, GNB's
coverage compares unfavourably with the average of 66.7%
for Moody's-rated banks in Poland as of December 2015.
The reduction of the NPL coverage was partly due to the sale and write-off
a some of the older problem loans with higher loan loss reserves.
According to the bank, as of December 2015 about half of the total
housing non-performing loans became delinquent by more than 90
days within the past one year, witnessing accelerated asset quality
deterioration against the general trend in the Polish banking system that
benefits from the benign operating environment in the country.
Further, such high share of new NPLs will likely require higher
provisioning over the next 12 to 18 months.
GNB's profitability and therefore ability to absorb additional provisions
needs through earnings will remain challenged. Despite lower funding
cost, one-off income from the sale of shares in VISA Europe
and exemption from the bank tax from Q2 2016 onwards, the bank reported
a small net loss of PLN15.9 million (EUR3.6 million) in
H1 2016 vs. a net income of PLN208.8 (EUR52.5 million)
a year earlier, driven by lower fee generation and income from subsidiaries,
as well as a material rise in loan loss provisions. Given its profitability
challenges, GNB is admitted under a special program of the Polish
regulator for restoring loss-making banks' long-term
profitability which temporarily exempts the bank from paying the bank
tax. Measures taken under the program, along with the significant
savings from the exemption of the bank tax will likely benefit GNB's
operating profitability over the next 12 to 18 months. However,
the bank's net income remains vulnerable to higher loan loss provisions
as well as to potential significant costs arising from policy measures
on Swiss Franc (CHF) mortgages. GNB has one of the largest exposures
to CHF mortgages in Poland, which accounted for 28% of the
bank's total loans as of June 2016.
More positively, GNB's CET1 ratio improved materially to 12.3%
as of June 2016 from 9.7% as of December 2014 owing mainly
to deleveraging and associated lower risk weighted assets as well as gains
from sale of some subsidiaries, thereby supporting its b1 BCA.
However, it is only modestly above the regulatory recommended minimum
level of 11.76%, which includes several buffers such
as capital conservation buffer, foreign-currency mortgage
risk buffer and O-SII buffer, leaving limited risk-absorption
buffers.
-- WHAT COULD MOVE THE RATINGS UP/DOWN
A significant reduction in the level of NPLs coupled with improving profitability
and capitalisation will likely lead to the stabilisation of the ratings
outlook.
A material deterioration in the bank's loan book and/or large costs arising
from the implementation of policy measures on CHF mortgages may result
in ratings downgrade.
Furthermore, changes in the bank's liability structure may modify
the amount of uplift provided by Moody's Advanced LGF analysis and lead
to a higher or lower notching from the bank's adjusted BCA, thereby
affecting the deposit ratings and CRA.
LIST OF AFFECTED CREDIT RATINGS
Issuer: Getin Noble Bank S.A.
Affirmations:
....LT Bank Deposits (Local & Foreign),
Affirmed Ba2, outlook changed to Negative from Stable
....Counterparty Risk Assessment, Affirmed
Ba1(cr)
....Adjusted Baseline Credit Assessment,
Affirmed b1
....Baseline Credit Assessment, Affirmed
b1
Outlook Actions:
....Outlook, changed to Negative from
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.
Armen L. Dallakyan
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
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 Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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