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Rating Action:

Moody's confirms Ba2 rating of Finansbank and Finansleasing at Ba3; outlook negative

20 May 2015

London, 20 May 2015 -- Moody's Investors Service has today confirmed Finansbank AS's (Turkey) Ba2 long-term deposit and senior unsecured ratings and baseline credit assessment (BCA) of b1. The long-term deposit ratings were assigned a negative outlook. The Ba3 issuer rating of Finans Finansal Kiralama A.S. (FinansLeasing), its fully-owned subsidiary was also confirmed.

The rating actions conclude the review initiated on 18 February 2015 and follow the rating action on Finansbank's ultimate parent, National Bank of Greece S.A. (NBG) (deposits Caa3 negative, BCA caa3). The confirmation of the BCA of Finansbank, and thus its deposit ratings, reflects Moody's view that the Turkish subsidiary continues to maintain a franchise that is well established and largely independent from that of NBG.

NBG is Finansbank's controlling shareholder with a 99% ownership stake. For further details on the rating actions on parent bank NBG, please refer to Moody's press release: paste link here

Furthermore, Moody's assigned a Counterparty Risk Assessment (CR Assessment) of Ba2(cr)/Not Prime(cr) to Finansbank, following the rating agency's publication of its revised Banks methodology. Please click this link to access the methodology, published on 16 March 2015: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320662.

RATINGS RATIONALE

--- FINANSBANK

RATIONALE FOR THE BCA

The confirmation of Finansbank's BCA reflects Moody's view that despite the ongoing problems at the Greek parent level, its Turkish subsidiary continues to maintain a well-established, largely independent franchise from that of NBG, aided by the bank's granular client-base and domestic funding profile, as well as its strong operating and regulatory ring-fencing.

The following factors underpin a low correlation between Finansbank and its parent NBG (1) the track-record of little correlation between the parent and subsidiary's performance and risk profiles for the past years; (2) strong regulatory ring-fencing ensuring full retention of cash income and limited exposure to the parent; and (3) financial trends (capital, profitability and funding profile) that are largely in line with other Turkish peers.

Finansbank maintains solid capital levels, with a Basel III consolidated capital adequacy ratio (CAR) of 16.9% and a Tier 1 ratio of 12.8% at end-2014, better than the peer-group average of 13.8% and 11%, respectively. Current Tier 2 capital from NBG amounts to a low 3% of Finansbank's balance sheet and would require regulatory approval before being redeemed.

Moody's considers the bank's earnings streams to be granular, and its net interest margin -- albeit declining -- compares favourably with those of its Turkish peers. Although the bank's loan-to-deposit ratio stood at 123% as end-2014, slightly above the market average at 121%, Finansbank's dependence on market funding is moderate at 25% of its total assets. The medium to-long term loan facilities from International Development Institutions contributes to a benign refinancing schedule of wholesale funds, compared to its Turkish peers.

Therefore, despite the recent downgrade of NBG these considerations support one of Moody's highest BCA differentials between a subsidiary and parent.

DEPOSIT AND SENIOR UNSECURED RATINGS

The confirmation of Finansbank's Ba2 long-term deposit and senior unsecured ratings mirrors the confirmation of bank's standalone BCA and the maintenance of a two-notch uplift to the deposit rating from the BCA. This support uplift is based on Moody's assumption of a high likelihood of government (systemic) support, in case of need, given Finansbank's systemic importance in Turkey (Baa3 negative).

RATIONALE FOR THE NEGATIVE OUTLOOK

The outlook on the deposit and issuer rating is negative, reflecting the outlook on the parent, NBG. A further downgrade of the parent bank would imply a close to default condition for the parent which could increase stress-levels for the whole group.

RATIONALE FOR THE CR ASSESSMENT

As part of today's actions, Moody's has assigned, a Ba2(cr)/Not Prime(cr) CR Assessment to Finansbank. The CR Assessment, which is not a rating, reflects an issuer's probability of defaulting on certain bank operating liabilities, such as covered bonds, derivatives, letters of credit and other contractual commitments. In assigning the CR Assessment, Moody's evaluates the issuer's standalone strength and the likelihood, should the need arise, of affiliate and government support, as well as the anticipated seniority of counterparty obligations. The CR Assessment also assumes that authorities will likely take steps to preserve the continuity of a bank's key operations, maintain payment flows, and avoid contagion should the bank enter a resolution.

--- FINANSLEASING

FinansLeasing's Ba3 foreign-currency issuer and corporate family ratings were also confirmed, given the similar rating action on the immediate parent's ratings. FinansLeasing's ratings are based on the BCA of b3 and Moody's assumption of a very high probability of support from its immediate majority shareholder (69%), Finansbank.

WHAT COULD MOVE THE RATINGS UP/DOWN

The negative outlook implies limited upward pressure on the subsidiaries' ratings.

Today's confirmation reflects Moody's view of the high independence of the Turkish subsidiaries' franchise. However, the rating agency also recognises that further deterioration in the parent's financial fundamentals and downward pressure on the parent's ratings could lead to group-wide spillover effects that could ultimately weaken Finansbank's and Finansleasing's franchise strength.

Therefore, notwithstanding the relative independence of the Turkish subsidiaries at this stage, further significant downward pressure on NBG's ratings could negatively impact their standalone and long-term ratings. In addition, any deterioration of their own financial fundamentals (regardless of parental connections) would exert downward pressure on the ratings.

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.

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.

Irakli Pipia
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

Yves Lemay
MD-Banking & Sovereign
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

Moody's confirms Ba2 rating of Finansbank and Finansleasing at Ba3; outlook negative
No Related Data.
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