Actions follow the confirmations of Spanish parents' standalone ratings
New York, October 25, 2012 -- Moody's Investors Service today confirmed the long- and short-term
ratings of the US mainland subsidiaries of Banco Santander S.A.
(Santander) and Banco Bilbao Vizcaya Argentaria, S.A.
(BBVA). Following the confirmations, Moody's returned
the subsidiaries' rating outlooks to stable, with the exception
of Santander Holdings USA, Inc. (SHUSA), which was
assigned a negative outlook. These actions conclude the reviews
for downgrade that were initiated on 27 June 2012. Moody's
also continued the reviews for downgrade on the long- and short-term
ratings of Santander's and BBVA's Puerto Rico bank subsidiaries.
(For purposes of this press release, "US subsidiaries"
exclude the Puerto Rico subsidiaries.) See List of Affected Ratings
below.
Today's actions follow the rating confirmations of Santander (standalone
bank financial strength rating (BFSR)/baseline credit assessment (BCA)
of C-/baa2, negative outlook) and BBVA (standalone BFSR/BCA
of D+/baa3, negative outlook). These actions are discussed
in the press release "Moody's concludes rating reviews on majority
of Spanish banks after sovereign rating confirmation," dated 24
October 2012 and available on moodys.com.
LIST OF AFFECTED RATINGS
Subsidiaries of Santander:
- Santander Holdings USA, Inc. (SHUSA): all
long- and short-term ratings (senior at Baa2) confirmed;
negative outlook assigned
- Sovereign Capital Trust IV: Ba1 (hyb) preferred stock rating
confirmed; negative outlook assigned
- Sovereign Capital Trust V: (P)Ba1 preferred stock rating
confirmed
- Sovereign Capital Trust VI: Ba1 (hyb) preferred stock rating
confirmed; negative outlook assigned
- Sovereign Bank, N.A.: all long-
and short-term ratings (deposits at Baa1), including the
standalone BFSR/BCA of C-/baa1, confirmed; stable outlook
assigned
- Sovereign Real Estate Investment Trust: Ba1 (hyb) non-cumulative
preferred stock rating confirmed; stable outlook assigned
- Banco Santander Puerto Rico: all long- and short-term
ratings remain on review for downgrade; the standalone BFSR/BCA of
C-/baa1, which was placed on review for downgrade on 10 April
2012 because of Puerto Rico's difficult operating environment, also
remains on review for downgrade
Subsidiaries of BBVA:
- BBVA USA Bancshares, Inc.: Baa3 long-term
issuer rating confirmed; stable outlook assigned
- Compass Bank: all long- and short-term ratings
(deposits at Baa2), including the standalone BFSR/BCA of C-/baa2,
confirmed; stable outlook assigned
- Phoenix Loan Holdings: Ba2 (hyb) non-cumulative
preferred stock rating confirmed; stable outlook assigned
- Banco Bilbao Vizcaya Argentaria Puerto Rico: all long-
and short-term ratings remain on review for downgrade; the
standalone BFSR/BCA of C-/baa2, which was placed on review
for downgrade on 10 April 2012 because of Puerto Rico's difficult operating
environment, also remains on review for downgrade
For additional information on bank ratings, please refer to the
webpage containing Moody's related announcements: http://www.moodys.com/bankratings2012.
RATINGS RATIONALE
Today's confirmations of the US subsidiaries' ratings follow
the confirmations of their parents' standalone ratings and reflect
Moody's view that the bank subsidiaries are sufficiently insulated
from problems at their parent companies to support higher standalone ratings.
This view is underpinned by the strong regulatory ring-fencing
in the US, which should prevent extraordinary capital and liquidity
flows from the subsidiaries to their Spanish parents.
Other key considerations supporting Moody's view that the subsidiaries
are relatively independent from their parents include: 1) the bank
subsidiaries are primarily core deposit-funded and have limited
reliance on short-term, confidence sensitive wholesale funding,
2) the bank subsidiaries have their own customers that are almost entirely
US-based, and they do not derive significant revenues from
providing services to their parents' customers or from distribution
of their parents' products, 3) the bank subsidiaries and their
US holding companies have separate boards of directors with independent
members, 4) the subsidiaries have their own infrastructures and
are not heavily reliant on their parents for key business/control functions,
and 5) the subsidiaries are relatively insulated from the macroeconomic
pressures affecting their parents in Spain.
Following today's confirmations, the standalone ratings of
Santander's and BBVA's lead US banks (Sovereign Bank and Compass
Bank, respectively) remain one notch above their parents'
respective standalone ratings. Given the characteristics described
above, Moody's said that a one-notch downgrade of the
parents' standalone ratings likely would not affect the standalone
ratings of the bank subsidiaries. This is reflected in the stable
outlooks on Sovereign Bank and all of BBVA's US subsidiaries,
including Compass Bank. Moody's added that these entities
had stable outlooks prior to this latest review for downgrade, reflecting
their good capital positions, improvement in their profitability
and asset quality metrics, and reductions in their asset concentrations.
The ratings of Santander's US holding company, SHUSA,
and its capital trust subsidiaries continue to benefit from one notch
of parental support uplift given Santander's continued capacity
to support these subsidiaries. This is reflected in Santander's
standalone rating of baa2, one notch above SHUSA's intrinsic
financial strength of baa3. A one-notch downgrade of Santander's
standalone rating would likely result in the removal of parental support
uplift at SHUSA. As a result, following today's confirmations,
Moody's assigned a negative rating outlook to SHUSA and its capital
trust subsidiaries, consistent with the negative outlook on its
Spanish parent.
In the event of a multi-notch downgrade of the parents' standalone
ratings, the standalone ratings of the bank subsidiaries would be
reassessed. Although Moody's believes that the subsidiaries
are reasonably insulated from their parents' credit issues,
the linkages that do remain could have negative consequences for the subsidiaries
if the parents' credit profiles weaken significantly. Those
linkages include: 1) the subsidiaries' significant reliance
on parental support in recent years, 2) shared name/branding to
varying degrees, which could lead to contagion or confidence sensitivity
issues, and 3) key members of management have come from their Spanish
parents, which heightens the risk that those managers could be pulled
out of the US if needed in Spain or other parts of the companies.
Moody's added that significant deterioration in Santander's
creditworthiness could also have a negative effect on SHUSA's funding
profile, given its majority ownership of Santander Consumer USA,
Inc., a subprime/near-prime auto finance company that
is reliant on confidence sensitive wholesale funding to finance its operations.
As part of today's actions, Moody's continued the reviews
for downgrade on the long- and short-term ratings of Banco
Santander Puerto Rico and Banco Bilbao Vizcaya Argentaria Puerto Rico.
The Puerto Rico bank subsidiaries' standalone ratings were initially
placed on review for downgrade in April 2012, reflecting the adverse
effects of Puerto Rico's ongoing recession on its banking sector,
as well as the weak prospects for a sustainable recovery in the coming
years. Moody's added that the reviews will consider the probability
that parental support would be provided, if needed, and the
parents' capacity to provide support. Moody's expects
to conclude those reviews shortly.
The principal methodology used in these ratings was Moody's Consolidated
Global Bank Rating Methodology published in June 2012. Please see
the Credit Policy page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
The below contact information is provided for information purposes only.
Please see the issuer page on www.moodys.com for Moody's
regulatory disclosure of the name of the lead analyst and the office that
has issued the credit rating.
Joseph?B?Pucella
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert?Franklyn?Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's confirms the ratings of US subsidiaries of Santander and BBVA
