Actions follow conclusion of methodology-related reviews and revision of government support considerations
On January 04, 2016, the press release was corrected as follows: In the fifth paragraph of the REGULATORY DISCLOSURES section, changed the unsolicited credit ratings disclosure to: “The ratings of rated entities ABANCA Corporacion Bancaria, S.A., Bancaja Emisiones, S.A. Unipersonal, Caymadrid International Ltd. and Bankia, S.A. were not initiated or not maintained at the request of these rated entities”. In the list of affected credit ratings accessible via hyperlink from the press release, changed the unsolicited credit ratings disclosure for ABANCA Corporacion Bancaria, S.A., Bancaja Emisiones, S.A. Unipersonal, Caymadrid International Ltd. and Bankia, S.A. and Banco Popular Espanol, S.A. to: “This rating was not initiated or not maintained at the request of the rated entity”; and added the following disclosure for Banco Popular Espanol, S.A.: “Moody’s considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody’s. On this basis, the rated entity or its agent(s) is considered to be a participating entity. The rated entity or its agent(s) generally provides Moody’s with information for the purposes of its ratings process”. Revised release follows.
Madrid, June 17, 2015 -- Moody's Investors Service has today concluded its reviews on the ratings
of 20 banks in Spain. The reviews were initiated on 17 March 2015
(see press release at https://www.moodys.com/research/--PR_321005),
following the publication of Moody's new bank rating methodology and revisions
to its government support assumptions for these banks.
In light of the new banking methodology, Moody's rating actions
generally reflect the following considerations (1) the "Moderate +"
macro profile of Spain (Baa2 positive); (2) the improved outlook
for banks' core financial fundamentals based on the strengthening
operating environment; (3) the protections offered to depositors
and senior creditors as assessed by Moody's Advanced Loss Given Failure
(LGF) analysis, reflecting the benefit of instrument volume and
subordination protecting creditors from losses in the event of resolution;
and (4) Moody's view of a decline in the likelihood of government support
for all Spanish banks.
Among the rating actions that Moody's has taken on the Spanish banks are
the following:
- 12 long-term bank deposit ratings upgraded, one
affirmed, five confirmed and two downgraded
- Five short-term bank deposit ratings upgraded, 12
affirmed and three confirmed
- Eight bank senior unsecured debt ratings upgraded, two
confirmed and two downgraded
- Two short-term bank senior unsecured debt ratings upgraded
and seven affirmed
- Six baseline credit assessments (BCAs) upgraded, 13 affirmed
and one confirmed
Moody's has also assigned Counterparty Risk (CR) Assessments to 20 Spanish
banking groups and their branches, in line with its new bank rating
methodology.
Moody's has assigned stable outlooks to the deposit and issuer/debt ratings
of all affected banks, with the exception of positive outlooks assigned
to Banco Santander S.A. (Santander), Santander Consumer
Finance S.A. (SCF), Catalunya Banc S.A.,
Abanca Corporacion Bancaria S.A. (Abanca) and Caja Rural
de Navarra (CRN) and a negative outlook to Ibercaja Banco S.A.
(Ibercaja).
Moody's has withdrawn the outlooks on all junior instrument ratings
and subordinated debt ratings for its own business reasons. Please
refer to Moody's Investors Service's Policy for Withdrawal of Credit Ratings,
available on its website, www.moodys.com.
Outlooks, which provide an opinion on the likely rating direction
over the medium term, are now assigned only to long-term
deposit and issuer/senior unsecured debt ratings.
Please click on this http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_182392
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
Please refer to this link for the new methodology: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320662
RATINGS RATIONALE
The new methodology includes several elements that Moody's has developed
to help accurately predict bank failures and determine how each creditor
class is likely to be treated when a bank fails and enters resolution.
These new elements capture insights gained from the crisis and the fundamental
shift in the banking industry and its regulation.
(1) THE "MODERATE+" MACRO PROFILE OF SPAIN
Spanish banks' operations have a strong domestic focus, with the
exception of Banco Santander, Banco Bilbao Vizcaya Argentaria S.A.
(BBVA) and SCF. As such, their performance is highly influenced
by Spain's large, diversified and affluent economy,
which displays a sustained improvement in economic growth, as well
as moderate susceptibility to event risk. Therefore, these
banks have a Macro Profile of "Moderate +", in
line with that of Spain.
Banco Santander, BBVA and SCF display very large geographic diversification
and therefore are exposed to macro variables across various countries
and regions. Since a substantial amount of their exposures are
in countries with stronger macro-economic conditions, their
Macro Profiles are in the "Strong-" to "Strong+"
categories, which is higher than that of Spain.
(2) IMPROVING CORE FINANCIAL FUNDAMENTALS
The Spanish banks' BCAs (median at ba2) reflect their high level of problematic
exposures, although improving macroeconomic conditions are translating
into a gradual improvement in asset-risk trends. Furthermore,
very low interest rates and subdued business volumes constrain their revenue
generation capacity, but loss-absorption capacity has improved
relative to potential balance-sheet losses. Lastly,
liquidity metrics have strengthened in the context of continued balance-sheet
deleveraging and normalised market access.
However, the banks' BCAs range widely from caa2 to baa1, which
highlight both the very large variances in financial performance,
in conjunction with differences in geographic reach, and the level
of problematic exposures (see below for outlines of the analytical considerations
for the individual banks covered in this press release).
(3) PROTECTION OFFERED TO SENIOR CREDITORS, AS CAPTURED BY MOODY'S
ADVANCED LGF LIABILITY ANALYSIS
Spanish banks are subject to the EU's Bank Resolution and Recovery
Directive (BRRD), which Moody's considers to be an Operational Resolution
Regime. Accordingly, Moody's applies its Advanced LGF analysis
to Spanish banks' liability structures, thereby mostly applying
its standard assumptions. These assumptions include a residual
tangible common equity (TCE) ratio of 3%, losses post-failure
of 8% of tangible banking assets, a 25% run-off
in junior wholesale deposits, a 5% run-off in preferred
deposits, and a 25% probability of deposits being preferred
to senior unsecured debt. Because Moody's assumes that the country's
deposit base is essentially retail in nature, it considers a proportion
of 10% of junior deposits below the estimated EU-wide average
of 26% for eight of the affected banks. The Advanced LGF
analysis results generally in "very low" to "moderate" loss-given-failure
for long-term junior deposits as well as senior unsecured debt
ratings, reflecting the banks' substantial volume of deposit funding
as well as the amount of senior unsecured debt and securities more subordinated
to it.
(4) DECLINE IN THE LIKELIHOOD OF GOVERNMENT SUPPORT
Deposit and senior unsecured debt ratings now range from Caa1 to A3.
In addition to the effects of the new methodology on the banks'
ratings, Moody's has lowered its expectations about the degree
of government support for banks in Spain. The main trigger for
this reassessment is the introduction of the BRRD in the European Union
in January 2015. Following Moody's revised assumptions,
only six Spanish banks' ratings continue to benefit from government
support. However, in some cases, the negative effect
on the Spanish banks' ratings from a decline in the expectation of government
support has been counterbalanced by the low loss assumptions under the
new LGF framework, but for other banks it has caused a downgrade
of their deposit and senior unsecured debt ratings.
OUTLOOK RATIONALE
Moody's expects that the sound recovery of the Spanish economy will
support the gradual improvement of banks' asset-quality metrics
and profitability. As such, almost all the Spanish banks
affected by today's rating actions have a stable outlook on their
deposit and senior unsecured debt ratings.
--- BANK SPECIFIC ANALYTIC FACTORS
--- Banco Santander S.A. (Santander)
The one-notch upgrade of Santander's deposit and issuer/senior
unsecured debt ratings to A3 with a positive outlook, incorporates
(1) the affirmation of the bank's BCA and adjusted BCA at baa1;
and (2) Moody's LGF analysis that provides one notch of uplift from
the bank's adjusted BCA for the deposit and senior unsecured debt
ratings.
The affirmation of Santander's baa1 BCA reflects a combination of
the group's (1) diverse exposure to a variety of economies reflected
in a Macro Profile of "Strong"; (2) acceptable Asset
Risk, reflected in a historical problem loan ratio of 5.4%
and the expectation for sustained improvement for this factor; (3)
modest Capital, reflected in a TCE ratio of around 8%,
together with the group's proven capacity to generate capital in
times of stress; and (4) improving Profitability, anticipating
a recovery in earnings. Together, these scores result in
a combined Solvency score of baa3 which is a constraint on the bank's
BCA of baa1. The rating benefits from a relatively good funding
and liquidity position, reflected in combined Liquidity score of
baa1, as well as a high degree of business diversification stemming
from its ample geographic diversification that results in a one-notch
positive qualitative adjustment.
Under Moody's Advanced LGF analysis, Santander's long-term
deposit and issuer/senior unsecured debt ratings take into account their
very low loss-given-failure because of the group's high
volume of subordinated and senior unsecured debt outstanding, in
principle leading to a two-notch uplift respectively from the bank's
baa1 adjusted BCA. These ratings are, however, capped
by the sovereign's rating at one notch above the bank's baa1 adjusted
BCA.
Moody's believes that there is a moderate likelihood of government
support for Santander's debt and rated wholesale deposits,
in the event of its failure. This probability reflects the bank's
share in its domestic market and its status as global systemically important
bank (G-SIB), which may lead the government to intervene
in order to shield the bank from disruptive losses. This government
support assessment does not, however, translate into an additional
notching as Santander's BCA is already one notch higher than the
sovereign rating.
Santander's deposit and senior unsecured ratings carry a positive
outlook in line with Spain's government's bond rating (Baa2
positive).
--- Santander Consumer Finance S.A.
(SCF)
The one-notch upgrade of SCF's deposit and senior unsecured
debt ratings to A3 with a positive outlook, incorporates (1) the
affirmation of the bank's BCA at baa2 and adjusted BCA at baa1;
and (2) Moody's LGF analysis that provides one notch of uplift from
the bank's adjusted BCA of baa1 for the deposit and senior unsecured
debt ratings. Moody's continues to not incorporate any systemic
support uplift into SCF's ratings, and these are therefore
unaffected by the reduced government support assumptions.
The affirmation of SCF's standalone baa2 BCA reflects its strong
franchise as one of Europe's leading consumer finance entities as
well as its overall sound credit-risk profile, with good
profitability and stabilising asset-quality indicators.
The bank's standalone BCA also reflects its high --
albeit declining --reliance on wholesale funding.
Moody's believes that there is a high probability of support from
its parent, Banco Santander S.A. (deposits A3 positive,
BCA baa1). As a result of the support assessment, SCF's
adjusted BCA is baa1, one notch above its BCA.
As a domestic subsidiary of Santander, Moody's applies the
Advanced LGF analysis of its parent, in principle leading to a two-notch
uplift for SCF's deposits and senior unsecured ratings from the
bank's baa1 adjusted BCA. These ratings are, however,
capped by the sovereign's rating at one notch above SCF's baa1 adjusted
BCA.
SCF's deposit and senior debt ratings have a positive outlook,
in line with that of its parent Santander.
-- Banco Bilbao Vizcaya Argentaria, S.A.
(BBVA)
The two-notch upgrade of BBVA's deposit ratings to A3 and
the one-notch upgrade of its issuer/senior unsecured debt ratings
to Baa1, reflect (1) the affirmation of the bank's BCA and
adjusted BCA at baa2; and (2) the Advanced LGF analysis that provides
two notches of uplift from the bank's adjusted BCA for the deposit ratings
and one notch of uplift for the senior unsecured debt ratings.
The affirmation of BBVA's BCA reflects a combination of the scores
for the group's (1) diverse exposure to a variety of economies reflected
in a Macro Profile of "Strong-"; (2) moderate
Asset Risk, which reflects a historical problem loan ratio above
6% and the expectation of sustained improvement for this factor;
(3) adequate Capital, which reflects a TCE ratio of 9.7%
and the group's proven capacity to generate capital in times of
stress; and (4) improving Profitability, which reflects Moody's
expectation of a recovery in earnings. BBVA also displays a good
funding and liquidity profile. Furthermore, the BCA benefits
from a high degree of business diversification stemming from the bank's
ample geographic diversification, which has translated into a positive
qualitative adjustment of one notch.
Under Moody's Advanced LGF analysis, BBVA's long-term
deposit and issuer/senior unsecured debt ratings take into account their
very low and low loss-given-failure because of the group's
high volume of subordinated and senior unsecured debt outstanding,
leading to a two and one notch uplift, respectively, from
the bank's baa2 adjusted BCA.
Moody's believes that there is a moderate likelihood of government
support for BBVA's debt and rated wholesale deposits in the event
of its failure. This probability reflects the bank's share
in its domestic market and its G-SIB status, which may lead
the government to intervene in order to shield the bank from severe losses.
Moody's government support assessment does not, however,
translate into an additional notching because BBVA's BCA is already
at the same level as the sovereign rating.
--- Catalunya Banc, S.A.
The two-notch upgrade of Catalunya Banc's long-term
deposit and senior unsecured debt ratings to B1 from B3 reflects:
(1) the affirmation of the bank's caa2 BCA; (2) the upgrade
of the bank's adjusted BCA to b1 from caa2 after considering parental
support from BBVA; (3) the incorporation of the Advanced LGF analysis
that provides no uplift from the bank's adjusted BCA; which,
together, more than offset (4) reduced government support assumptions,
leading to a removal of systemic support ratings uplift.
Despite the completion of the acquisition of Catalunya Banc by BBVA in
April 2015, Moody's has affirmed the bank's caa2 BCA,
reflecting its weak standalone credit fundamentals. The factors
constraining the BCA are primarily (1) asset-quality weaknesses
across all asset classes; (2) a weak capital position according to
Moody's capital assessment, owing to the large amount of deferred
tax assets (DTAs); and (3) very modest profitability indicators.
At the same time, Moody's believes that Catalunya Banc will
benefit from a very high probability of support from its parent BBVA.
As a result of Moody's affiliate support assessment, the rating
agency upgraded Catalunya Banc's adjusted BCA to b1, four
notches above its caa2 BCA.
Given the very recent acquisition, the rating agency bases its LGF
analysis on the standalone liabilities of Catalunya Banc, thereby
assuming that as long as the integration into BBVA group has not visibly
progressed (at this stage, only the acquisition is complete),
an (unlikely) near-term resolution of Catalunya Banc could still
be performed for the bank without a detrimental effect on BBVA or its
creditors. The Advanced LGF analysis therefore takes into account
the moderate loss-given-failure because of Catalunya Banc's
relatively low volume of respective liabilities and the amount of subordinated
debt, leading to no uplift from the bank's b1 adjusted BCA.
Moody's reduced the government support assumption for Catalunya
Banc to "low" upon the expected implementation of resolution
legislation, leading to no government uplift for the deposit and
senior unsecured debt ratings, from "high" and two notches
previously.
The positive outlook on Catalunya Banc's deposit and senior unsecured
debt ratings reflects Moody's expectations of its full integration
into BBVA, which displays a much stronger credit profile,
benefiting from its oversight and experience in restructuring and integration.
-- Caixabank S.A.
The one-notch upgrade of Caixabank's long-term deposit
and issuer/senior unsecured debt ratings to Baa2 reflect (1) the confirmation
of the bank's BCA and adjusted BCA at ba1; and (2) the Advanced
LGF analysis that provides one notch of uplift from the bank's adjusted
BCA for its issuer/senior unsecured debt and two notches of uplift for
its deposit; and (3) the maintenance of one notch of government support
uplift for its issuer/senior unsecured debt. Concurrently,
the bank's short-term deposit and debt ratings were upgraded
to Prime-2.
The confirmation of the bank's BCA is based on Caixabank's
strong commitment to maintain a capital ratio above 11% at all
times, post-acquisition of Portuguese Banco BPI (deposits
Ba3 stable, BCA b1). Caixabank's BCA of ba1 also reflects
its stable revenue-generation capacity underpinned by its leading
retail franchise, strong liquidity and funding profile and Moody's
expectation of a sustained improvement of its currently weak profitability
and asset-quality metrics. The group's high level
of problematic exposures and modest TCE are key constraints on the ba1
BCA.
Under Moody's Advanced LGF analysis, Caixabank's long-term
deposit and issuer/senior unsecured debt ratings take into account their
very low and low loss-given-failure because of the group's
high volume of subordinated and senior unsecured debt outstanding,
leading to a two and one-notch uplift, respectively,
from the bank's ba1 adjusted BCA.
Caixabank's long-term deposit and issuer/senior unsecured
debt ratings continue to benefit from government support leading to a
one-notch uplift for its issuer/senior unsecured rating,
despite Moody's revision of government support expectations to "moderate"
from "high". Moody's government support assessment
does not, however, translate into an additional notching for
deposits because Caixabank's deposit rating is already at the same
level as the sovereign rating.
-- Bankia S.A.
The one-notch upgrade of Bankia's deposit rating to Ba3 and
the confirmation of its senior unsecured debt ratings at B1 , reflects
(1) the upgrade of the bank's BCA and adjusted BCA to b2 from b3;
(2) the Advanced LGF analysis that provides one notch of uplift from the
bank's adjusted BCA for the deposit ratings and no uplift for the senior
unsecured debt ratings; which, together, more than offset
(3) the reduction of government support uplift to one notch from two.
The one-notch upgrade of Bankia's standalone BCA to b2 reflects
the bank's weak (although improving) profitability and asset-quality
metrics, and its good liquidity profile. The BCA also incorporates
Bankia's very high amount of DTAs that weakens its TCE ratio,
thereby limiting potential upside for the BCA. Under Moody's
Advanced LGF analysis, Bankia's long-term deposit and
senior unsecured debt ratings take into account their low and moderate
loss-given-failure because of the group's relatively modest
volume of subordinated and senior unsecured debt outstanding, leading
to one and zero notches of uplift, respectively, from the
bank's b2 adjusted BCA.
Bankia's long-term deposit and senior unsecured debt ratings
continue to benefit from one notch of government support uplift despite
Moody's revision of government support expectations to "moderate"
from "high".
---Banco Sabadell S.A.
Banco Sabadell's deposit rating was upgraded by two notches to Baa3
and its senior unsecured debt ratings by one notch to Ba1. Concurrently,
the bank's short-term deposit ratings were upgraded to Prime-3
while its short-term debt ratings were affirmed at Not-Prime.
The rating action reflects (1) the affirmation of the bank's BCA
and adjusted BCA at ba3; (2) the Advanced LGF analysis that provides
two notches of uplift from the bank's adjusted BCA of ba3 for the deposit
ratings and one notch of uplift for the senior unsecured debt ratings;
and (3) the maintenance of one notch of government support uplift.
The affirmation of Banco Sabadell's standalone ba3 BCA reflects
the bank's (1) resilient revenue generation capacity aided by its
SME franchise and acquisitive strategy; and (2) sound liquidity profile.
The bank's BCA is constrained by its weak, albeit improving,
asset-quality metrics and high weight of DTAs on its capital,
which results in a modest TCE ratio.
On 24 March 2015, Moody's affirmed Banco Sabadell's
BCA to reflect the bank's announcement on 20 March 2015 that it
had launched a cash offer for 100% of the capital of TSB Banking
Group plc (TSB, unrated), based in the UK (Aa1 stable).
The affirmation captured the rating agency's view that the combined
entity's standalone credit profile will remain resilient after integrating
TSB into Banco Sabadell.
Under Moody's Advanced LGF analysis, Banco Sabadell's
long-term deposit and senior unsecured debt ratings take into account
their very low and low loss-given-failure because of the
group's high volume of subordinated and senior unsecured debt outstanding,
leading to two notches and one notch of uplift, respectively,
from the bank's ba3 adjusted BCA.
Banco Sabadell's long-term deposit and senior unsecured debt
ratings continue to benefit from one notch of government support uplift,
despite Moody's revision of government support expectations to "moderate"
from "high".
--Banco Popular Español S.A. (Banco
Popular)
The two-notch upgrade of Banco Popular's deposit rating to
Ba1 and the one-notch upgrade of its senior unsecured debt ratings
to Ba2 reflect (1) the affirmation of the bank's BCA and adjusted
BCA at b1; (2) the Advanced LGF analysis that provides two notches
of uplift from the bank's adjusted BCA of b1 for the deposit ratings and
one notch of uplift for the senior unsecured debt ratings; and (3)
the maintenance of one notch of government support uplift.
The affirmation of Banco Popular's standalone b1 BCA reflects the
bank's (1) strong franchise value in the SME market; (2) adequate
capital levels; and (3) improved liquidity profile. The bank's
BCA is constrained by its very weak, albeit stabilising, asset-quality
metrics and depressed recurring earnings and high credit costs that have
weakened its bottom-line profitability.
Under Moody's Advanced LGF analysis, Banco Popular's
long-term deposit and senior unsecured debt ratings take into account
their very low and low loss-given-failure because of the
bank's high volume of debt outstanding, leading to two notches and
one notch of uplift, respectively, from the bank's b1 adjusted
BCA.
Banco Popular's long-term deposit and senior unsecured debt
ratings continue to benefit from one notch of government support uplift,
despite Moody's revision of government support expectations to "moderate"
from "high".
--Unicaja Banco S.A. (Unicaja)
The affirmation of Unicaja's long-term deposit ratings at
Ba3 with a stable outlook and the downgrade of its senior unsecured debt
ratings to (P)B1 incorporate (1) the affirmation of the bank's BCA
and adjusted BCA at b1; (2) the Advanced LGF analysis that provides
one notch of uplift from the bank's adjusted BCA of b1 for the deposit
ratings and no uplift for the senior unsecured debt ratings; and
(3) reduced government support assumptions, which lead to a removal
of systemic support uplift.
The affirmation of Unicaja's standalone b1 BCA reflects the bank's
(1) sound liquidity profile underpinned by sizeable liquid assets;
(2) still-high level of problematic assets and modest profitability,
which nevertheless should improve as the integration with Banco CEISS
(unrated) gains momentum and starts benefiting from the more benign domestic
economic environment; and (3) weak TCE-to-risk weighted
assets (RWA) ratio, because of the heavy burden of DTAs.
Under Moody's Advanced LGF analysis, Unicaja's long-term
deposit and senior unsecured debt ratings take into account their low
and moderate loss-given-failure because of the group's relatively
modest volume of subordinated and senior unsecured debt outstanding,
leading to one and zero notches of uplift, respectively, from
the bank's b1 adjusted BCA.
Moody's has lowered its government support assumptions for the bank to
"low", resulting in no support uplift for the debt and deposit
ratings, from "moderate" and one notch previously.
--- Ibercaja Banco S.A. (Ibercaja)
The one-notch downgrade of Ibercaja's long-term deposit
rating to B1 from Ba3 reflects (1) the affirmation of the bank's
BCA at b1 and the adjusted BCA at the same level; (2) the Advanced
LGF analysis, which provides no uplift from the bank's adjusted
BCA; and (3) the reduced government support assumption, which
lead to a removal of systemic support uplift.
Ibercaja's affirmed standalone BCA of b1 reflects (1) the bank's
good franchise value in its home region of Aragon, which has been
reinforced after the integration of Banco Grupo Caja 3; and (2) its
favourable liquidity position, with modest refinancing requirements
and sizable liquid assets. However, the BCA is constrained
by Ibercaja's weakened financial profile following its acquisition of
Caja 3, which resulted in a lower risk-absorption capacity
for the combined entity to absorb further asset-quality deterioration.
Under Moody's Advanced LGF analysis, Ibercaja's long-term
deposit ratings take into account their moderate loss-given-failure
because of the bank's relatively low volume of wholesale deposits
and subordination to it, leading to no uplift from the bank's
b1 adjusted BCA.
Moody's reduced the government support assumption for Ibercaja to
"low" upon the expected implementation of resolution legislation,
leading to no government uplift for the deposit ratings, from "moderate"
and one notch previously.
The negative outlook on Ibercaja's deposit ratings indicates negative
rating pressure if the bank does not meet the deleveraging expectations
in terms of its substantial securities portfolio, resulting in a
higher-than-anticipated expected loss severity in the event
of a resolution.
-- Kutxabank S.A.
The one-notch downgrade of Kutxabank's deposit and senior
unsecured debt ratings to Ba2 with a stable outlook incorporates the affirmation
of the bank's BCA and adjusted BCA at ba2, the Advanced LGF
analysis that provides no uplift from the bank's adjusted BCA of ba2 and
the reduced government support assumptions, leading to a removal
of systemic support ratings uplift.
In affirming Kutxabank's standalone ba2 BCA, Moody's
reflects the positive evolution of risk-absorption capacity that
is underpinned by (1) the bank's improving asset-quality
metrics; (2) its modest revenue generation capacity that should further
improve as Spain's economy consolidates its sound recovery;
and (3) the bank's sound liquidity profile. The affirmation
also reflects Kutxabank's high level of DTAs on its capital,
which results in a lower TCE-to-RWA compared with its strong
regulatory capital levels.
Under Moody's Advanced LGF analysis, Kutxabank's long-term
deposit and senior unsecured debt ratings take into account their moderate
loss-given-failure because of the group's modest volume
of subordinated and senior unsecured debt outstanding, leading to
no uplift, respectively, from the bank's ba2 adjusted BCA.
Moody's has lowered its government support assumptions for the bank to
"low", resulting in no support uplift for the debt and deposit
ratings, from "moderate" and one notch previously.
--- Bankinter, S.A.
Bankinter's deposit ratings were upgraded by two notches to Baa1
while its senior unsecured debt ratings were upgraded by one notch to
Baa2. These ratings carry a stable outlook. Concurrently,
the bank's short-term ratings were upgraded to Prime-2.
The rating actions incorporate (1) a one-notch upgrade of the BCA
and adjusted BCA to baa3; and (2) the Advanced LGF analysis that
provides two notches and one notch of uplift from the bank's adjusted
BCA respectively; thereby more than offsetting (3) the reduced government
support assumptions, leading to a removal of systemic support ratings
uplift.
Moody's upgraded Bankinter's standalone BCA to baa3,
recognising the material improvement of the bank's credit-risk
profile, especially in terms of asset-risk metrics,
which rank among the strongest in the Spanish banking sector, as
well as in terms of capital adequacy. However, modest recurrent
profitability and high reliance on market funding, albeit both improving,
constrain the BCA.
Moody's Advanced LGF analysis provides two notches and one notch
of uplift from the bank's baa3 adjusted BCA for the long-term
deposit and senior unsecured debt ratings respectively, given the
very low and low loss-given-failure which reflects the high
volumes of respective liabilities and the amount of subordinated debt.
Moody's reduced the government support assumption for Bankinter
to "low" upon the expected implementation of resolution legislation,
leading to no government uplift for the deposit ratings, from "moderate"
and one notch previously.
--- Abanca Corporacion Bancaria, S.A.
(Abanca)
The confirmation of Abanca's long-term deposit ratings at
Caa1 incorporates (1) a two-notch upgrade of the BCA and adjusted
BCA to b3, which offsets the outcome of (2) the Advanced LGF analysis,
resulting in a minus-one notch from the bank's adjusted BCA;
as well as (3) reduced government support assumptions, leading to
a removal of systemic support ratings uplift.
Moody's upgraded Abanca's standalone BCA to b3 from caa2 recognising
a material improvement of the bank's credit-risk profile,
especially in terms of asset-risk metrics and its funding profile,
on the back of ongoing deleveraging and sizeable liquid assets.
However, the bank's weak capital position according to Moody's
capital assessment, owing to the large amount of DTAs, and
its weak recurrent profitability continue to constrain the b3 BCA.
Under Moody's Advanced LGF analysis, Abanca's long-term
deposit ratings take into account their high loss-given-failure
because of the bank's low volume of wholesale deposits and subordination
to it, leading to a minus-one notch from the bank's
b3 adjusted BCA.
Moody's reduced the government support assumption for Abanca to
"low" upon the expected implementation of resolution legislation,
leading to no government uplift for the deposit ratings, from "moderate"
and one notch previously.
The positive outlook of Abanca's deposit ratings reflects Moody's
expectations that the shrinkage of the balance sheet, observed in
recent periods, is likely to continue over the upcoming quarters,
resulting in lower loss-given-failure for the bank's
deposits.
--- Liberbank S.A.
The confirmation of Liberbank's long-term deposit ratings
at B1 with a stable outlook and of its senior unsecured debt ratings at
(P)B1, incorporates (1) the one-notch upgrade of the BCA
to b1; (2) the Advanced LGF analysis that provides no uplift from
the bank's adjusted BCA of b1; which, together, offset
(3) the reduced government support assumptions, leading to a removal
of systemic support ratings uplift.
In upgrading Liberbank's standalone BCA to b1, Moody's
reflects the bank's improving asset-quality metrics and sound
liquidity profile. The BCA also incorporates Liberbank's
modest recurring earnings power, which should begin to yield benefits
from Spain's improving macroeconomic conditions. Liberbank's
standalone BCA is constrained by the weak TCE ratio, given the very
high amount of DTAs.
Under Moody's Advanced LGF analysis, Liberbank's long-term
deposit and senior unsecured debt ratings take into account their moderate
loss-given-failure because of the group's modest volume
of subordinated and senior unsecured debt outstanding, leading to
no uplift, respectively, from the bank's b1 adjusted BCA.
Moody's has lowered its government support assumptions for the bank to
"low", resulting in no support uplift for the debt and deposit
ratings, from "moderate" and one notch previously.
--- Caja Laboral Popular Cooperativa de Crédito
(Caja Laboral)
The confirmation of Caja Laboral's long-term deposit rating
at Ba1 incorporates (1) the affirmation of the bank's BCA and adjusted
BCA at ba1; as well as (2) the Advanced LGF analysis that provides
no uplift from the bank's adjusted BCA. Government support assumptions
for Caja Laboral remain low and are unaffected by Moody's revised
systemic support assumptions. As a result, they continue
to provide no ratings uplift.
The affirmation of Caja Laboral's standalone ba1 BCA reflects (1)
the bank's adequate local brand franchise in the Basque Country
and Navarre; (2) its adequate capitalisation levels; and (3)
its sound retail deposit base and low reliance on wholesale funding.
The bank's BCA also reflects its high level of non-earning
assets -- albeit comparing favourably with the Spanish banking
system average -- and its historically modest profitability
levels.
Under Moody's Advanced LGF analysis, Caja Laboral's
long-term deposit rating takes into account its moderate loss-given-failure
because of the bank's low volume of wholesale deposits and subordination
to it, leading to no uplift from the bank's ba1 adjusted BCA.
--- Banco Cooperativo Espanol S.A.
(BCE)
The one-notch upgrade of BCE's long-term deposit rating
to Ba1 incorporates: (1) the upgrade of the bank's BCA to
ba2 from ba3 and of the adjusted BCA to ba1 from ba3; (2) the Advanced
LGF analysis that provides no uplift from the bank's adjusted BCA;
which, together, more than offset (3) reduced government support
assumptions, leading to a removal of systemic support ratings uplift.
The upgrade of BCE's standalone BCA to ba2 reflects (1) the bank's
moderate risk profile and diminished asset exposure to the rural cooperatives
sector - albeit its exposure to the Spanish sovereign debt remains
high, encompassing concentration and some market risk; and
(2) its adequate liquidity profile. The bank's BCA is constrained
by BCE's very high leverage because of its role as service provider
and its modest but stable profitability levels.
BCE is owned by the 38 rural co-operatives amalgamated under the
Asociacion Espanola de Cajas Rurales (AECR; unrated) and by DZ Bank
AG (deposits/senior unsecured A1 on review for upgrade, BCA baa2),
based in Germany (Aaa stable). BCE's purpose is to provide
these rural co-operatives with a cost-effective comprehensive
range of financial services. Moody's believes there is a
high probability of support from these rural co-operatives associated
under the AECR, given BCE's role as central treasury provider
for this group of entities. As a result of the affiliate support
assessment, BCE's adjusted BCA is ba1, one notch above
the bank's BCA.
Under Moody's Advanced LGF analysis, BCE's long-term
deposit rating takes into account its moderate loss-given-failure
because of the bank's relatively low volume of wholesale deposits
and subordination to it, leading to no uplift from the bank's ba1
adjusted BCA.
Moody's has lowered its government support assumptions for the bank to
"low", resulting in no support uplift for the debt and deposit
ratings, from "moderate" and one notch previously.
---Banca March, S.A.
Banca March's long-term deposit ratings were upgraded by
two notches to Baa1 with a stable outlook. Concurrently,
the bank's short-term deposit ratings were upgraded to Prime-2.
The rating actions incorporate (1) the affirmation of the bank's
BCA and the adjusted BCA (both at baa3); and (2) the Advanced LGF
analysis that provides two notches of uplift from the bank's adjusted
BCA. Government support assumptions for Banca March remain low
and are unaffected by Moody's revised systemic support assumptions.
As a result, they continue to provide no ratings uplift.
Moody's affirmation of Banca March's standalone BCA of baa3
reflects (1) the bank's well-established franchise in its
home region; (2) its strong liquidity profile and favourable asset-quality
indicators; and (3) its sound risk-absorption capacity,
supported by Moody's assessment of a strong capital base.
The BCA also reflects exposure to equity risk through its investment vehicle,
Corporacion Financiera Alba (Alba; unrated) and high single-name
concentrations. Although Alba's activities represent a high
exposure to equity risk, sizeable unrealised capital gains mitigate
this risk.
The upgrade of Banca March's deposit ratings takes into account
the very low loss-given-failure for the bank's wholesale
deposits under Moody's Advanced LGF analysis, because of the
bank's substantial volumes of deposits and subordination to it,
leading to two notches of uplift from the bank's baa3 adjusted BCA.
--- Cecabank, S.A.
Cecabank's long-term deposit ratings were upgraded by four
notches to Baa2 with a stable outlook. Concurrently, the
short-term deposit ratings were upgraded to Prime-2 from
Not-Prime. The rating actions incorporate (1) a three-notch
upgrade of the BCA and adjusted BCA to ba1 reflecting a sustained recovery
in the bank's performance following a successful strategic reorientation;
(2) the Advanced LGF analysis that provides two notches of uplift from
the bank's adjusted BCA; thereby more than offsetting (3) the
reduced government support assumptions, leading to a removal of
systemic support ratings uplift.
The upgrade of Cecabank's standalone BCA to ba1 from b1 reflects
the bank's success in the strategic reorientation of its business
model. Since 2011, the bank embarked on a business transformation,
focusing on the provision of independent depositary and ancillary services
to a widening group of clients. The bank has been able to sign
long-term depositary services agreements with a large set of Spanish
financial institutions, thereby establishing itself as the third-largest
service provider in the country. The agreements provide Cecabank
with a stable source of earnings, allowing the bank to offset the
decline in other revenue lines. Other factors supporting the BCA
upgrade are Cecabank's satisfactory capitalisation relative to its
risk profile and its comfortable liquidity position.
Under Moody's Advanced LGF analysis, Cecabank's long-term
deposit ratings take into account the very low loss-given-failure
because of the bank's very high volume of wholesale deposits,
leading to two notches of uplift from the bank's ba1 adjusted BCA.
Moody's reduced the government support assumption for Cecabank to
"low" upon the expected implementation of resolution legislation,
leading to no government uplift for the deposit ratings, from "moderate"
and one notch previously.
--- Caja Rural de Navarra (CRN)
The confirmation of CRN's long-term deposit rating at Baa3
with a positive outlook incorporates (1) the affirmation of the bank's
BCA and adjusted BCA both at baa3; and (2) the Advanced LGF analysis
that provides no uplift from the bank's adjusted BCA. Government
support assumptions for CRN remain low and are unaffected by Moody's
revised systemic support assumptions. As a result, they continue
to provide no ratings uplift.
The affirmation of CRN's standalone baa3 BCA reflects the bank's
sound financial fundamentals, namely (1) its stronger asset-quality
performance compared with that of the banking system; (2) its sound
capitalisation levels; (3) its stable retail deposit base and low
reliance on wholesale funding; and (4) the fact that it mainly operates
in Navarra, one of the wealthiest regions in Spain. The bank's
BCA also reflects CRN's modest (albeit improving) profitability
levels.
Under Moody's Advanced LGF analysis, CRN's long-term
deposit rating takes into account its moderate loss-given-failure
because of the bank's low volume of wholesale deposits and subordination
to it, leading to no uplift from the bank's baa3 adjusted BCA.
The outlook on CRN's deposit rating is positive to reflect the upward
pressure that could develop on the bank's ratings if the improving
trend of its credit fundamentals consolidates over the next 12-18
months.
--- Bankoa, S.A.
The confirmation of Bankoa's deposit ratings at Baa3 with a stable
outlook incorporates (1) the affirmation of the bank's ba2 BCA and
baa3 adjusted BCA, which incorporate unchanged affiliate support
assumptions from French Groupe Credit Agricole (GCA; unrated);
and (2) the Advanced LGF analysis that provides no uplift from the bank's
adjusted BCA. Government support assumptions for Bankoa remain
low and are unaffected by Moody's revised systemic support assumptions.
As a result, they continue to provide no ratings uplift.
The affirmation of the standalone ba2 BCA reflects the bank's (1)
modest franchise; (2) parental funding reliance; and (3) low
risk-adjusted profitability and efficiency indicators. However,
the bank's predominantly retail operations, which ensure a
high degree of earnings recurrence, partly offset the abovementioned
negative features. Furthermore, the bank's asset-quality
indicators are good compared with those of its domestic peers, and
it derives benefits from its integration within the larger GCA.
Moody's believes that Bankoa benefits from a very high probability
of support from its ownership by GCA. As a result of Moody's
affiliate support assessment, the rating agency affirmed Bankoa's
adjusted BCA at baa3, two notches above its BCA.
Under Moody's Advanced LGF analysis, Bankoa's long-term
deposit ratings take into account their moderate loss-given-failure
because of the bank's relatively low volume of subordinated and
senior unsecured debt outstanding, leading to no uplift from the
bank's baa3 adjusted BCA.
--- ASSIGNMENT OF COUNTERPARTY RISK ASSESSMENTS
Moody's has also assigned CR Assessments to 20 Spanish banks. CR
Assessments are opinions of how counterparty obligations are likely to
be treated if a bank fails, and are distinct from debt and deposit
ratings in that they (1) consider only the risk of default rather than
expected loss and (2) apply to counterparty obligations and contractual
commitments rather than debt or deposit instruments. The CR Assessment
is an opinion of the counterparty risk related to a bank's covered bonds,
contractual performance obligations (servicing), derivatives (e.g.,
swaps), letters of credit, guarantees and liquidity facilities.
The CR Assessment takes into account the issuer's standalone strength
as well as the likelihood of affiliate and government support in the event
of need, reflecting the anticipated seniority of these obligations
in the liabilities hierarchy. The CR Assessment also incorporates
other steps that authorities can take to preserve the key operations of
a bank should it enter a resolution.
For the 20 affected Spanish banks, the CR Assessments are positioned,
prior to government support, one to three notches above the banks'
adjusted BCAs, based on the cushion against default provided to
the senior obligations represented by the CR Assessment by subordinated
instruments. The main difference with Moody's Advanced LGF
approach used to determine instrument ratings is that the CR Assessment
captures the probability of default on certain senior obligations,
rather than expected loss, therefore focusing purely on subordination
and taking no account of the volume of the instrument class.
For two of these banks (Bankia and Banco Popular), the CR Assessments
also benefit from government support in line with Moody's support
assumptions on deposits and senior unsecured debt. This reflects
Moody's view that any support that governmental authorities provide
to a bank and that benefits senior unsecured debt or deposits is very
likely to benefit operating activities and obligations reflected by the
CR Assessment as well, consistent with Moody's belief that
governments are likely to maintain such operations as a going-concern
in order to reduce contagion and preserve a bank's critical functions.
The CR Assessments of 18 other banks do not benefit from government support.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Upward rating momentum on most Spanish banks' ratings could be driven
by clear evidence that asset quality is improving, along with a
sustainable recovery in banks' recurring earnings and/or improved
quality of capital (with a lower weight of DTAs). Any significant
macroeconomic growth beyond Moody's central scenario of 2.7%
GDP growth in 2015 could further underpin signs of a turnaround in the
banks' performance. For Santander, SCF and BBVA,
any upward pressure on their ratings is unlikely as long as the Spanish
government's bond rating remains at Baa2.
Downward rating pressure on the banks' ratings could emerge if (1)
a broad deterioration of their financial fundamentals hinders their ability
to preserve their solvency levels; (2) operating conditions worsen
beyond Moody's current expectations; and/or (3) their liquidity
profiles deteriorate significantly.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
March 2015. 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.
The following information supplements Disclosure 10 ("Information
Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J)
of SEC Rule 17g-7") in the regulatory disclosures made at
the ratings tab on the issuer/entity page on www.moodys.com
for each credit rating as indicated:
Moody's was not paid for services other than determining a credit
rating in the most recently ended fiscal year by the person(s) that paid
Moody's to determine this credit rating.
The ratings of rated entities ABANCA Corporacion Bancaria, S.A., Bancaja Emisiones, S.A. Unipersonal, Caymadrid International Ltd. and Bankia, S.A. were not initiated or not maintained at the request of these rated entities
These rated entities ABANCA Corporacion Bancaria, S.A.
Bancaja Emisiones, S.A. Unipersonal, Caymadrid
International Ltd. and Bankia, S.A or related third
parties did not participate in the rating process. Moody's was
not provided, for purposes of the rating, access to books,
records and other relevant internal documents of the rated entity or related
third party.
Please click on this link (http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_182392)
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Unsolicited ratings
• Non participating issuers
• [EU only] participation in unsolicited ratings
• Person approving the credit rating
• Releasing office
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
analyst and the Moody's legal entity that has issued the ratings.
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
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 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 concludes reviews on 20 Spanish banks' ratings
