Madrid, September 15, 2008 -- Moody's Investors Service has today downgraded Banco Pastor's long-term
bank deposit and senior debt ratings to A2 from A1, and the bank
financial strength rating (BFSR) to C from C+. The C BFSR
translates into a baseline credit assessment of A3. The P-1
short-term debt and deposit rating was affirmed at Prime-1.
The outlook on the long-term debt and deposit ratings and the bank
financial strength is negative.
"Compared to other C+ rated peers, the downgrade reflects
the bank's lower risk absorption capacity amid the pronounced correction
in the Spanish real estate market to which the bank not only has a greater
exposure than C+ rated peers, but this exposure is also in
geographical areas in which Moody's expects a more significant adjustment
of the real estate sector," says Olga Cerqueira, Moody's
Madrid-based lead analyst for Banco Pastor.
The bank's significant growth in recent years has been concentrated
outside its home region, and the areas of expansion have concentrated
the exposure to real estate and also accounted for a substantial part
of rising delinquencies. In 2008, the bank recorded a rapid
deterioration in asset quality, with the level of problem loans
more than doubling in the first six months of the year. "Moody's
downgrade also reflects the high concentration per borrower, with
the majority of the largest exposures being real estate developers or
construction companies," explains Ms Cerqueira.
Moody's negative outlook on the BFSR and debt and deposit ratings
reflects the concern that Banco Pastor's asset quality may continue
to deteriorate further in the coming months, and therefore a progressive
reduction in the bank's ability to face an increase in delinquencies
without impacting profitability, efficiency, capital adequacy
or impairing Banco Pastor's franchise. At the end of June
2008, the NPL ratio stood at 2.16% (up from 0.99%
at year-end 2007 and excluding securitised assets de-recognised
from the balance sheet due to the transfer of credit risk) and the coverage
ratio was 104%, down from 230% at year-end
2007,
Moody's added that the Spanish economy's pace of deterioration,
which has been very rapid and abrupt, is translating into a more
severe downturn in the credit cycle in the Spanish banking system than
initially anticipated.
Moody's notes that Banco Pastor currently has financial flexibility
to withstand a deterioration in asset quality due to its unrealised capital
gains, most of which stem from its 1.9% stake in Union
Fenosa and from its insurance operations (which the bank plans to sell).
Banco Pastor also displays a satisfactory liquidity profile as it has
almost no long-term market funds maturing in the next 18 months,
while a significant part of its assets mature in the next 12 months.
Moody's cautions that a further downgrade of Banco Pastor's
rating could be prompted by a potential increase in problem loans of a
magnitude that the absolute level of problem loans would either represent
around 50% of the bank's loan loss reserves and shareholders
equity or would wipe out one-year recurrent profits due to the
high provisions required.
Moody's assesses the probability of systemic support for Banco Pastor
in the event of need as being high. This results in a one-notch
uplift in the deposit ratings to A2/Prime-1 from the A3 baseline
credit assessment.
The following ratings were downgraded:
..Issuer: Banco Pastor, S.A.
.Bank Financial Strength Rating, Downgraded to C from C+
.LT Issuer Rating, Downgraded to A2 from A1
.LT Bank Deposit, Downgraded to A2 from A1
.Senior Unsecured Debt Rating, Downgraded to A2 from A1
.Senior Unsecured Regular Bond/Debenture, Downgraded to A2
from A1
.Subordinate Debt Rating, Downgraded to A3 from A2
.Junior Subordinate Regular Bond/Debenture, Downgraded to
A3 from A2
..Issuer: Pastor International Finance
.Senior Unsecured Debt Rating, Downgraded to A2 from A1
..Issuer: Pastor International Capital
.Subordinate Debt Rating, Downgraded to A3 from A2
..Issuer: Pastor Particip. Preferent.,
S.A. Unipersonal
.Preferred Stock, Downgraded to Baa1 from A3
..Issuer: Pastor Internacional Debt, S.A.
Unipersonal
.Senior Unsecured Debt Rating, Downgraded to A2 from A1
.Subordinate Debt Rating, Downgraded to A3 from A2
Outlook Actions:
..Issuer: Banco Pastor, S.A.
.Outlook, Changed to Negative from Stable
..Issuer: Pastor International Finance
.Outlook, Changed to Negative from Stable
..Issuer: Pastor International Capital
.Outlook, Changed to Negative from Stable
..Issuer: Pastor Particip. Preferent.,
S.A. Unipersonal
.Outlook, Changed to Negative from Stable
..Issuer: Pastor Internacional Debt, S.A.
Unipersonal
.Outlook, Changed to Negative from Stable
Moody's previous rating action on Banco Pastor was implemented on
13 April 2007, when the bank's BFSR was downgraded to C+
from B- as result of the implementation of Moody's Joint
Default Analysis and BFSR methodologies.
Based in La Coruña, Spain, Banco Pastor reported consolidated
total assets of EUR29.4 billion as at 31 June 2008.
London
Johannes Wassenberg
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Madrid
Olga Cerqueira
Analyst
Financial Institutions Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades Banco Pastor to A2/C, negative outlook