Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Announcement:

Moody's maintains review for downgrade on BNP Paribas' Aa2 long-term ratings to consider impact of funding challenges on Credit Profile

Global Credit Research - 14 Sep 2011

Further to the review initiated on 15 June 2011

Paris, September 14, 2011 -- Moody's Investors Service has announced an extension of its review of the standalone Bank Financial Strength Rating (BFSR) and long-term debt and deposit ratings of BNP Paribas (BNPP), originally announced on 15 June, 2011.

In the meantime, the rating agency has concluded that

(i) BNPP's profitability and capital base currently provide an adequate cushion to support its Greek, Portuguese, and Irish exposures, and

(ii) its long-term debt and deposit ratings are appropriately positioned two notches above BNPP's standalone financial strength to reflect the likelihood it will receive systemic support from governmental authorities if needed.

However, Moody's announced that it will extend its review for downgrade of BNPP's B- BFSR and Aa2 long-term debt and deposit ratings to consider the implications of the potentially persistent fragility in the bank financing markets, given BNPP's continued reliance on wholesale funding.

The review is unlikely to lead to a downgrade in the long-term ratings of more than one notch.

The Prime-1 short-term ratings have been affirmed.

Moody's will publish separate press releases on other institutions covered by the review announced on 15 June, 2011.

RATINGS RATIONALE

In its press release of 15 June 2011, Moody's announced a review of the BFSRs and long-term ratings of three French banking groups (BNP Paribas, Credit Agricole SA and Societe Generale), because of concerns about the potential inconsistency between their ratings and their exposures to the Greek economy, either through their holdings of government bonds or the credit they had extended to the Greek private sector.

Moody's has concluded that BNPP has a sufficient level of profitability and capital that it can absorb potential losses it is likely to incur over time on its Greek government bonds (Greece is rated Ca, outlook developing), and to remain capitalized consistent with its BFSR, even if the creditworthiness of Irish and Portuguese government bonds were to deteriorate further. This assessment incorporates loss assumptions that are significantly higher than the impairments the bank has already recognized (see below).

However, during the review, Moody's concerns about the structural challenges to banks' funding and liquidity profiles have increased, in light of worsening refinancing conditions, and have prompted an extension of the review. The continuing review will focus directly on these funding and liquidity challenges for BNPP, which, given the current environment, could become long-term constraints to the performance of its franchise.

Limited Impact Of Greek And Other Peripheral Sovereign Exposures On Overall Risk Profile

Since the start of the review for downgrade, BNPP, along with many other financial institutions, has expressed its intention to participate in a proposed restructuring of Greek debt. This led to its recognition of EUR534 million of impairments against the relevant bonds in the second quarter of 2011. BNPP was able to absorb this amount easily, as it reported net earnings of EUR2.1 billion (1) for the quarter and continues to build its capital ratios.

BNPP still has very large exposures to the peripheral European countries' government bonds in its banking and trading books, totalling EUR5.9 billion for Greece, Ireland (Ba1, negative outlook), and Portugal (Ba2, negative outlook) combined as at 30 June 2011 (1), the majority of which matures after five years. Italian and Spanish bond holdings are much larger, at EUR24 billion and EUR3.9 billion respectively at end-2010, according to European Banking Authority disclosures. BNPP's exposure to Greek private sector credit, by contrast, is relatively small, around EUR3.6 billion at end-2010, and Moody's believes it is mostly in the form of large corporate exposures that are less sensitive to the domestic economy. On the same basis, BNPP's loans to the Portuguese and Irish private sector totalled EUR4.5 billion and EUR4.8 billion respectively.

In its review, and in the context of a stress test covering BNPP's global loan book and structured finance exposures, Moody's considered a severe case scenario for certain government bond holdings, using haircuts significantly higher than the impairments the bank has already recognized: 60% for Greece, 50% for Ireland, 50% for Portugal, 10% for Spain and 7% for Italy. Taking into account the impairments already made against some Greek bonds, we believe resultant pretax losses under this scenario would total around EUR4.9 billion, 5.6% of BNPP's common equity Tier 1 capital after tax and 54bp of risk-weighted assets, with further mitigation possible via reduced dividends. Loss assumptions for private sector credit were based upon those previously published by Moody's, see "European Banking Credit Loss Assumptions", published on 2 August, 2010.

As a result, Moody's considers BNPP to be sufficiently profitable and capitalized that it can absorb potential related losses. Like many banks, BNPP has sought to enhance its capitalization, and reported a common equity Tier 1 ratio of 9.6% at end-June 2011 (2), up from about 6% at the start of 2008. More generally, BNPP also benefits from an exceptional degree of diversity thanks to a broad array of businesses, most of which have substantial scale and strong franchises in their own rights and thus sound profitability. In addition, the bank has been growing its deposit base and lengthening its market funding. However, given the size of the Italian bond holdings, BNPP's creditworthiness would be vulnerable to a deterioration of that of Italy. Additionally, its capital markets business is large and volatile, and in common with those of many other banks, is characterised by a certain complexity and opacity of risk profile, as well as a relatively confidence-sensitive customer base.

CONTINUED REVIEW OF BFSR TO FOCUS ON FUNDING PROFILE

As noted above, BNPP's wholesale funding, the majority of which is short-term, is still high in absolute terms and may pose a vulnerability given considerable market tension. During the summer, concerns over sovereign exposures and the health of sovereign balance sheets grew significantly. This was most manifest in the behaviour of US money market funds, which are an important source of short-term US dollars for BNPP. These funds became particularly risk-averse, resulting in reduced availability and shorter tenors for this type of financing. For more details, see Moody's Special Comment, "EU Banks: Stronger Liquidity and Central Bank Actions Mitigate Recent Volatility but Longer-Term Concerns Remain".

Moody's notes that BNPP has substantial holdings of central bank eligible assets, which it reports to be around EUR150 billion and of which USD30 billion is eligible at the Federal Reserve, and short-term interbank assets of EUR43 billion (3). In addition, it has full access to Eurosystem central bank liquidity in major currencies. As such we believe that BNPP can withstand the short-term credit-negative impact of the contraction in dollar funding and note that euro funding remains plentiful. Even so, the amount of its wholesale funding requirements makes the bank vulnerable to deterioration in market sentiment. At end--2010, from a strictly accounting view, debt securities and interbank borrowings totalled EUR376 billion, or 25% of its total balance sheet excluding insurance technical reserves and derivatives, 61% of which was due to mature within three months and 77%, within one year (4).

Moody's expects BNPP to continue to enhance the amount and quality of its liquidity, reduce its reliance on the wholesale markets, and lengthen the duration of its borrowings, in anticipation of the challenges posed by the Net Stable Funding Ratio and Liquidity Coverage Ratio to be introduced by Basel III. However, given the likelihood that bank financing conditions will remain fragile and prone to disruption so long as concerns persist over European sovereigns, and the potential for that disruption to become more marked and sustained over time, Moody's is maintaining its review on BNPP's BFSR. The extended review will assess the potential for further, increased disruption to undermine BNPP's business model and creditworthiness given its continued reliance on short-term funding, as well as the potential impact on other credit considerations, notably profitability.

LONG-TERM DEBT AND DEPOSIT RATINGS REMAIN ON REVIEW FOR POSSIBLE DOWNGRADE

Moody's regards France as a high support country, in which BNPP plays a major role as an intermediary and to whose banking system it is integral.

Moody's assesses the probability of systemic support for BNPP in the event of distress as being very high. As such, the bank receives a two-notch uplift from its standalone financial strength rating of B-, equivalent to BCA of A1 on the long-term scale, bringing the GLC deposit rating to Aa2, which remains on review for possible downgrade, reflecting the review for downgrade on the BFSR.

SUBORDINATED OBLIGATIONS AND HYBRID SECURITIES

The ratings on BNPP's dated subordinated obligations are notched off the bank's fully supported, long-term GLC deposit ratings and therefore remain under review for downgrade.

The ratings on the bank's hybrid obligations are notched off BNPP's Adjusted BCA of A1, in accordance with "Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt", published 17 November 2009. They remain on review for downgrade, reflecting the review for downgrade on the BFSR.

KEY RATING FACTORS FOR OTHER ENTITIES AFFECTED BY THIS RATING ANNOUNCEMENT

For LaSer Cofinoga, rated C- / Baa1 / A1, on review for possible downgrade, the key rating factors are (i) access to backup funding facility from BNPP; (ii) the evolution of asset quality; (iii) the potential impact of the reform of consumer credit in France on the bank's strategy and franchise. For all other entities affected by this rating announcement, please refer to the rationale above.

PREVIOUS RATING ACTION AND METHODOLOGIES

Please see the ratings tab on the issuer/entity page on Moodys.com for the last Credit Rating Action and the rating history.

The methodologies used in these ratings were Bank Financial Strength Ratings: Global Methodology published in February 2007, Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007, and Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt published 17 November 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

SOURCES

(1) Source: unaudited interim financial statements

(2) Source: unaudited 2nd quarter financial results

(3) Source: company press release and audited 2010 financial statements

(4) Source: audited 2010 financial statements

REGULATORY DISCLOSURES

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 entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating 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.

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.

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

Paris
Nicholas Hill
Senior Vice President
Financial Institutions Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Frankfurt am Main
Carola Schuler
MD - Banking
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's maintains review for downgrade on BNP Paribas' Aa2 long-term ratings to consider impact of funding challenges on Credit Profile
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

 


All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating 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 or in preparing the Moody’s Publications.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

 


NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody’s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

© 2014 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: