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Rating Action:

Moody's downgrades the supported ratings of Spanish banks' North American bank subsidiaries; all ratings on review for downgrade

27 Jun 2012

Actions follow downgrades of parents' standalone ratings

New York, June 27, 2012 -- Moody's Investors Service has today downgraded certain long-term supported ratings of Banco Santander S.A.'s (Santander) and Banco Bilbao Vizcaya Argentaria, S.A.'s (BBVA) North American bank subsidiaries. Following the downgrades, Moody's placed the subsidiaries' long- and short-term ratings, including their standalone bank financial strength ratings (BFSR)/baseline credit assessments (BCA), on review for downgrade. See List of Affected Ratings below.

Today's actions follow the downgrades of Santander (standalone BFSR/BCA to C-/baa2 from C/a3, on review for further downgrade) and BBVA (standalone BFSR/BCA to D+/baa3 from C/a3, on review for further downgrade). These actions are discussed in the press release "Moody's downgrades Spanish banks," dated 25 June 2012 and available on moodys.com.

LIST OF AFFECTED RATINGS

Subsidiaries of Santander:

- Santander Holdings USA, Inc.: all long- and short-term ratings (senior at Baa2) placed on review for downgrade

- Sovereign Bank, N.A.: long-term bank deposit, senior debt and issuer ratings downgraded to Baa1 from A3; subordinate debt rating downgraded to Baa2 from Baa1; all long- and short-term ratings, including the standalone BFSR/BCA of C-/baa1, placed on review for downgrade

- Sovereign Real Estate Investment Trust: non-cumulative preferred stock rating downgraded to Ba1 (hyb) from Baa3; placed on review for further downgrade

- Sovereign Capital Trust IV: Ba1 (hyb) preferred stock rating placed on review for downgrade

- Sovereign Capital Trust V: (P)Ba1 preferred stock rating placed on review for downgrade

- Sovereign Capital Trust VI: Ba1 (hyb) preferred stock rating placed on review for downgrade

- Banco Santander Puerto Rico: long-term bank deposit, senior debt and issuer ratings downgraded to Baa1 from A3; all long- and short-term ratings placed 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, remains on review

Subsidiaries of BBVA:

- BBVA USA Bancshares, Inc.: long-term issuer rating downgraded to Baa3 from Baa1 and placed on review for further downgrade

- Compass Bank: long-term bank deposit, senior debt and issuer ratings downgraded to Baa2 from A3; subordinate debt rating downgraded to Baa3 from Baa1; all long- and short-term ratings, including the standalone BFSR/BCA of C-/baa2, placed on review for downgrade

- Phoenix Loan Holdings: non-cumulative preferred stock rating downgraded to Ba2 (hyb) from Baa3 and placed on review for further downgrade

- Banco Bilbao Vizcaya Argentaria Puerto Rico: long-term bank deposit, senior debt and issuer ratings downgraded to Baa2 from A3; subordinate debt rating downgraded to Baa3 from Baa1; all long- and short-term ratings placed on review for downgrade; the standalone BFSR/BCA of C-/baa2, which was placed on review for downgrade on 10 April 2012, remains on review

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 downgrades reflect the potential adverse effects of Santander's and BBVA's lower capacity to support their subsidiaries in North America, reflected by their lower standalone ratings. The downgrades of the parents' ratings were driven by the reduced creditworthiness of the Spanish sovereign, as captured by Moody's recent three-notch downgrade of Spain's government bond rating (Baa3, on review for further downgrade), which implies a weaker credit profile for Spanish banks. This results from the banks' multiple linkages with the sovereign, including (i) the impact of the government's financial position on the domestic economy; and (ii) the large exposures of most banks to their domestic government and to other counterparties that depend on the credit strength of the government.

The downgrade of Santander's and BBVA's standalone ratings, which are now one notch below the respective standalone ratings of their North American bank subsidiaries, means that the subsidiaries' ratings will no longer benefit from any uplift from parental support, with the exception of Santander Holdings USA, Inc. and its capital trust subsidiaries. Previously, Santander's North American bank subsidiaries benefited from one notch of parental support uplift, while BBVA's North American subsidiaries benefited from two notches of uplift.

The ratings of Santander Holdings USA, Inc. and its capital trust subsidiaries continue to benefit from one notch of uplift given the parent's continued capacity to support these subsidiaries. This is reflected by Santander's higher standalone rating of baa2, one notch above Santander Holdings USA, Inc.'s intrinsic financial strength of baa3.

We have also attached a hybrid (hyb) indicator to the non-cumulative preferred stock ratings of Sovereign Real Estate Investment Trust & Phoenix Loan Holdings.

RATIONALE FOR REVIEWS FOR DOWNGRADE

Following today's downgrades, all of the North American subsidiaries' ratings were placed on review for downgrade. The reviews reflect the potential adverse effects from weakening creditworthiness at the parent level on the standalone financial strength of their subsidiaries.

During its reviews of the bank subsidiaries' standalone ratings, Moody's will focus on the independence and resilience of the North American banks' financial strength in the event that the parents' creditworthiness is further affected and their ratings lowered. Generally, Moody's is comfortable with subsidiaries' standalone ratings exceeding those of their parents, but this is typically limited by linkages between the subsidiary and the parent bank. The extent to which the regulatory framework in the US insulates the subsidiaries from potential adverse developments in Spain will also be factored into Moody's review of the ratings.

RATING METHODOLOGIES

The methodologies used in these ratings were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: Global Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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.

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

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.

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.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

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.

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.

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 downgrades the supported ratings of Spanish banks' North American bank subsidiaries; all ratings on review for downgrade
No Related Data.
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