ING Group's A1 senior, A2 dated subordinated debt ratings also confirmed
Paris, February 02, 2010 -- Moody's Investors Service today confirmed ING Bank NV's C+
bank financial strength rating (BFSR), Aa3 senior long-term
debt and deposit ratings and A1 dated subordinated debt rating.
The BFSR carries a negative outlook, while the long-term
debt and deposit ratings carry a stable outlook. The bank's
Prime-1 short-term debt and deposit ratings were affirmed.
Moody's also confirmed, with a stable outlook, the A1 senior
rating and the A2 dated subordinated debt rating of ING Groep NV (ING
Group).
The rating actions conclude Moody's review for possible downgrade
of the ratings of ING Bank and ING Group initiated on 21 September 2009
and maintained on 27 October after ING and the European Commission reached
agreement on a restructuring plan.
Moody's also confirmed the Ba1 ratings of ING Group's preference
stocks, ING Verzekeringen NV's subordinated debt securities
and Equitable of Iowa Companies Capital Trust II's preferred stocks.
The B1 rating of ING Capital Funding Trust III's trust preferred
securities was also confirmed. These ratings now carry a positive
outlook and the rating actions conclude the review with direction uncertain
initiated on 27 October 2009.
CONFIRMATION OF THE BANK'S C+ BFSR, NEGATIVE OUTLOOK
ING Bank's C+ BFSR was confirmed as Moody's believes
it adequately represents the entity's creditworthiness, given
the relief provided by the asset protection scheme on the Alt-A
portfolio, the successful completion of a EUR7.5 billion
rights issue in December 2009 and, above all, the proposed
restructuring plan, which includes:
- the disposal of the bank's insurance activities by 2013;
- the merger of the bank with the group holding company,
thus eliminating double leverage; and
- the fact that the plan implies only limited changes to the bank's
overall scope and franchise, the largest change being the disposal
of ING Direct in the US.
The C+ BFSR incorporates Moody's expectation that the bank's
profitability and efficiency will remain lacklustre in coming years,
albeit at levels above those of 2008-09. However,
it also reflects the rating agency's view that the bank's
capital position, although moderate for its rating level,
nonetheless represents an adequate buffer for it to absorb potential losses
arising from the securities or loan portfolio.
Furthermore, Moody's notes that:
- the timing of the implementation of the restructuring plan is
uncertain;
- the group is still to decide between various options for the
disposal of its insurance operations; and
- given the relatively long horizon of this plan, some changes
are possible.
The negative outlook on the C+ BFSR captures Moody's view of
the potential uncertainties for the bank over the coming one- to
two-year period.
CONFIRMATION OF THE BANK'S SENIOR DEBT RATINGS, STABLE OUTLOOK
ING Bank's Aa3 long-term debt and deposit ratings were confirmed
as the Group, and particularly the Bank, is and will remain
a systemically important institution in two European markets, the
Netherlands and Belgium, and continues to have a significant retail
presence throughout Europe via ING Direct.
The ratings carry a stable outlook, as they would not come under
adverse pressure in the event of a one-notch downgrade of the BFSR.
CONFIRMATION OF ING BELGIUM'S BFSR AND SENIOR DEBT RATINGS
ING Belgium SA/NV (ING Belgium)'s BFSR was confirmed at C+
with a stable outlook reflecting the inherent stability of ING Belgium's
profile. The Aa3 long-term debt and deposit ratings were
also confirmed with a stable outlook as a consequence of both the confirmation
of its parent's debt ratings and of the bank's systemic nature
in Belgium.
CONFIRMATION OF ING GROUP'S SENIOR AND DATED SUBORDINATED RATINGS,
STABLE OUTLOOK
The confirmation of ING Group's senior and subordinated ratings
is a direct consequence of the confirmation of ING Bank's corresponding
senior and subordinated ratings. ING Group will become a pure bank
holding company of ING Bank, given the group's announcement
of its intention to divest its insurance operations by 2013. Therefore,
ING Group's senior and subordinated ratings reflect Moody's standard
notching for bank holding companies relative to ING Bank's ratings.
The stable outlook on ING Group's ratings reflects the stable outlook
on ING Bank's senior rating.
Moody's notes that double leverage at ING Group remains high and was close
to 140% at the end of 2008 (double leverage at the holding company
is calculated as the ratio between investments in subsidiaries and adjusted
shareholders' equity). However, the rating agency expects
this to decrease considerably in the next few years with the repayment
of the group's debt from the proceeds it secures from the disposal
of its insurance operations.
Moody's adds that it views as beneficial (from a quality of capital
perspective) the EUR7.5 billion rights issue completed in December
2009 to replace the EUR5 billion core Tier 1 securities received from
the Dutch state and to complete the additional payments for the illiquid
assets back-up facility.
CONFIRMATION OF HYBRID RATINGS, POSITIVE OUTLOOK
Moody's confirmation of the group's Ba1 and B1 hybrid securities
reflects the European Commission's decision not to force coupon deferral
on these securities as part of its approval of ING's state-aid
package. The current ratings of the hybrid securities reflect our
view that, given the restructuring of the group, there is
still some risk of coupon deferral on these securities. The positive
outlook reflects the possibility of these ratings to go up when the execution
risk deriving from the group's restructuring process diminishes.
All of the hybrid securities contain a dividend pusher provision.
However, Moody's notes that the dividend pusher is not applicable
as no dividend has been paid since August 2008.
The Ba1 rating on the cumulative hybrid securities reflects the fact that
the coupon payments on these instruments are cumulative, thereby
limiting the loss severity of a coupon deferral if this were to occur.
The B1 rating on the only non-cumulative trust preferred securities
issued by ING Capital Funding Trust III reflects the fact that,
under a going-concern assumption, the expected loss for investors
on this non-cumulative instrument is higher than on cumulative
securities.
LIST OF RATING ACTIONS
The following ratings were confirmed with a negative outlook:
ING Bank: C+ BFSR;
ING Bank Eurasia: Baa1 LT Bank deposits;
ING Bank Slaski SA: A2 LT Bank deposits.
The following ratings were confirmed with a stable outlook:
ING Bank: Aa3 senior debt and deposit ratings;
ING Bank NV: A1 dated subordinated rating;
ING Belgium SA/NV: C+ BFSR;
ING Belgium SA/NV: Aa3 senior debt and deposit ratings;
ING Groep NV: A1 senior debt rating;
ING Groep NV: A2 dated subordinated rating; and
Lion Connecticut Holding, Inc. (guaranteed by ING Groep NV):
A1 senior debt rating.
The following ratings were confirmed with a positive outlook:
ING Groep NV: Ba1 cumulative preference stocks;
ING Verzekeringen NV: Ba1 cumulative dated subordinated debt securities
with optional coupon deferral provision;
Equitable of Iowa Companies Capital Trust II (guaranteed by Lion Connecticut
Holding Inc.): Ba1 cumulative preferred stock with optional
coupon deferral provision rating; and
ING Capital Funding Trust III (guaranteed by ING Groep NV): B1 non-cumulative
trust preferred securities rating.
PREVIOUS RATING ACTIONS AND MOODY'S METHODOLOGIES
The last rating actions took place on 27 October 2009 when Moody's
downgraded the insurance financial strength ratings of ING Group's US
life insurance operating companies to A2 from A1 and ING Verzekeringen's
senior debt to Baa1 from A2. ING Verzekeringen's short-term
Prime-1 debt rating was also downgraded, to Prime-2.
ING Bank's C+ BFSR and Aa3 senior debt ratings and ING Group's
A1 senior debt rating remained on review for possible downgrade,
as did the ratings of certain of ING Bank's subsidiaries. Moody's
changed the review direction to uncertain from possible downgrade on the
Ba1 ratings of ING Group's preference stocks, ING Verzekeringen's
subordinated debt securities and Equitable of Iowa Companies Capital Trust
II's preferred stocks. The review direction on ING Capital
Funding Trust III's B1 trust preferred securities was also changed
to uncertain from possible downgrade.
The principal methodologies used in rating ING and its subsidiaries are
"Moody's Global Rating Methodology for Property and Casualty Insurers",
published in July 2008, "Moody's Global Rating Methodology for Life
Insurers", published in September 2006, "Bank Financial Strength
Ratings: Global Methodology", published in February 2007,
and "Incorporation of Joint-Default Analysis into Moody's Bank
Ratings: A Refined Methodology", published in March 2007;
these methodologies are available on www.moodys.com in the
Rating Methodologies sub-directory under the Research & Ratings
tab. Other methodologies and factors that may have been considered
in the process of rating these issuers can also be found in the Rating
Methodologies sub-directory on Moody's website.
The ratings of bank subordinated capital securities are assigned in line
with Moody's existing methodology entitled "Moody's Guidelines for Rating
Bank Hybrid Securities and Subordinated Debt" (published in November 2009)
and the publication of Moody's revised rating methodology for insurance
hybrids, issued on 12 January 2010. (For further details
please refer to the announcement entitled, "Moody's updates its
methodology for insurance hybrid ratings".)
Based in Amsterdam, ING Groep NV had total assets of EUR1,188
billion at end-September 2009 and reported a net loss of EUR223
million for the nine months ending September 2009.
Based in Amsterdam, ING Bank had total assets of EUR900 billion
at end-September 2009 and its Tier 1 ratio stood at 9.7%,
on an unfloored Basel II basis (applying the 80% floor, the
Tier 1 ratio would have stood at 8.9%). In the first
nine months of 2009, ING Bank reported a net profit of EUR420 million.
The insurance activities of ING Groep had total assets amounting to EUR298
billion at end-September 2009 and the insurance capital coverage
ratios for insurance activities was 256%. In the first nine
months of 2009, the insurance activities of ING Groep reported a
net loss of EUR644 million.
Paris
Stephane Le Priol
VP - Senior Credit Officer
Financial Institutions Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Antonello Aquino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's confirms ING Bank's Aa3 rating with a stable outlook
