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Rating Action:

Moody's places BPI's Ba3 senior and deposit ratings on review for downgrade

22 Mar 2016

Madrid, March 22, 2016 -- Moody's Investors Service has today placed on review for downgrade the following ratings of Banco BPI S.A. (BPI) and its supported entities: (1) the Ba3 long-term senior debt and deposit ratings; (2) the B2 subordinated debt ratings; (3) the (P)B3 junior subordinated programme ratings; (4) the backed Caa1(hyb) preference shares; (5) the bank's baseline credit assessment (BCA) and adjusted BCA of b1; and (6) its long-term Counterparty Risk Assessment (CRA) of Ba2(cr).

The review for downgrade was triggered by increased downside risks to BPI's credit profile, stemming from (1) the lack of visible advances in solving the bank's breach of the regulatory large exposure limits, in relation to its exposure to Angola (Ba2 review for downgrade), before the European Central Bank's (ECB) imposed deadline of 10 April 2016; and (2) heightened risks associated with its Angolan exposures, as reflected by Moody's decision to place on review for downgrade Angola's sovereign rating on 4 March 2016 (please see https://www.moodys.com/research/--PR_344711).

Moody's expects to conclude the rating review in the next few weeks, when the rating agency will have further visibility on the likelihood of an effective approval of remedial actions to reduce BPI's large exposures to Angola before the imposed deadline. During the review period, Moody's will also assess the credit implications for BPI of (1) remedial actions requested by the ECB's if the bank's large exposure limit breaches are not addressed in a timely fashion; (2) recent evidence of corporate governance shortcomings and (3) the impact of the deteriorating macroeconomic conditions in Angola if the bank's African operations are not deconsolidated.

BPI's short-term senior debt and deposit ratings at Not-Prime and its short-term CRA of Not-Prime(cr) are unaffected by today's rating action.

A list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

RATIONALE FOR THE RATING REVIEW

The review for downgrade of BPI's ratings was prompted by Moody's rising concerns about the bank's financial profile as the ECB's deadline is approaching, but no solution has yet been approved for BPI's large exposures to the Angolan state and the National Bank of Angola. These exposures, standing at EUR3.6 billion and EUR1.3 billion, respectively, exceed the limit to large exposures by EUR3.0 billion and 0.2 billion. The review for downgrade also highlights the heightened wider risks for the bank following Moody's recent review for downgrade of Angola's Ba2 sovereign bonds rating.

On 30 September 2015, BPI presented a plan to spin off its banking assets in Angola and Mozambique that was subject to the approval of the bank's Shareholder General Meeting. This demerger plan followed the ECB's requirement to comply with the large exposure limits in relation to BPI's Angolan exposures. Although the plan failed to be approved in February 2016, the bank's main shareholders Caixabank, S.A. (Baa2/Baa2 stable; ba1 and holding 44.1% of the bank's capital) and Santoro Finance - Prestacao de Servicos S.A. (unrated and with a 18.6% stake on BPI's capital) publicly disclosed that they were in negotiations to seek a solution for BPI's excess risk concentrations to Angola in early March.

However, as the ECB's deadline is approaching, Moody's is increasingly concerned about the consequences for BPI's credit profile and the imposition by the ECB of remedial actions if the deadline is not met, nor extended by the relevant authorities.

Furthermore, the above mentioned recent events have evidenced the crystallization of corporate governance issues at the bank that namely stem from the voting cap imposed to shareholders having more that 20% of voting rights. During the review period, Moody's will assess BPI's corporate behaviour and the likelihood that current corporate governance shortcomings could be solved in the near future or continue weighing on the bank's financial performance going forward.

Given the very relevant weight of the Angolan operations for BPI (i.e. 61% of total profit and around 19% of total group assets at end-December 2015), the review for downgrade also reflects the risks for the group's overall performance of a potential downturn of the Angolan economy owing to very low oil prices. During the review period, Moody's will also assess the potential negative implications that reduced fiscal spending and currency devaluation in Angola could pose for BPI's credit profile. If the demerger plan of the bank's African operations is approved before the rating agency concludes its rating review of Angola's sovereign rating, risks associated to this country will be dissipated as BPI will be only exposed to its Portuguese activities.

BPI's Ba3 long-term senior debt and deposit ratings on review for downgrade currently reflect: (1) the bank's b1 BCA, which has been placed on review for downgrade today, (2) no uplift from Moody's Advanced Loss Given Failure (LGF) analysis; and (3) one notch of uplift from Moody's assumptions of moderate government support from Portugal (Ba1 stable).

WHAT COULD CHANGE THE RATINGS UP/DOWN

Downward pressure on BPI's ratings could arise if it fails to achieve a solution to reduce its very large risk exposures to Angola, and/or its standalone credit profile is affected by a worsening of the economic conditions in Angola.

An upgrade of the bank's ratings is unlikely given the current review for downgrade.

LIST OF AFFECTED RATINGS

Issuer: Banco BPI S.A.

..Placed on Review for Downgrade:

....Long-term Counterparty Risk Assessment, Ba2(cr)

....Long-term Deposit Ratings, Ba3, outlook changed to Rating under Review from Stable

....Subordinate Medium-Term Note Program, (P)B2

....Senior Unsecured Medium-Term Note Program, (P)Ba3

....Junior Subordinate Medium-Term Note Program, (P)B3

....Subordinate Regular Bond/Debenture, B2

....Senior Unsecured Regular Bond/Debenture, Ba3; outlook changed to Rating under Review from Stable

....Long-term Issuer Rating, Ba3, outlook changed to Rating under Review from Stable

....Adjusted Baseline Credit Assessment, b1

....Baseline Credit Assessment, b1

..Outlook Actions:

....Outlook changed to Rating under Review from Stable

Issuer: BPI Capital Finance Ltd.

..Placed on Review for Downgrade:

....Backed Subordinate Medium-Term Note Program, (P)B2

....Backed Senior Unsecured Medium-Term Note Program, (P)Ba3

....Backed Junior Subordinate Medium-Term Note Program, (P)B3

....Backed Pref. Stock Non-cumulative, Caa1(hyb)

..Outlook Actions:

....Outlook changed to Rating under Review from No Outlook

Issuer: Banco BPI Cayman Ltd

..Placed on Review for Downgrade:

....Backed Subordinate Medium-Term Note Program, (P)B2

....Backed Senior Unsecured, (P)Ba3

....Backed Junior Subordinate Medium-Term Note Program, (P)B3

..Outlook Actions:

....Outlook changed to Rating under Review from No Outlook

Issuer: Banco BPI S.A. (Cayman)

..Placed on Review for Downgrade:

....Long-term Counterparty Risk Assessment, Ba2(cr)

....Senior Unsecured Regular Bond/Debenture, Ba3, outlook changed to Rating under Review from Stable

....Junior Subordinate Medium-Term Note Program, (P)B3

....Subordinate Medium-Term Note Program, (P)B2

....Subordinate Regular Bond/Debenture, B2

....Senior Unsecured Medium-Term Note Program, (P)Ba3

..Outlook Actions:

....Outlook changed to Rating under Review from Stable

Issuer: Banco BPI S.A. (Madeira)

..Placed on Review for Downgrade:

....Long-term Counterparty Risk Assessment, Ba2(cr)

....Junior Subordinate Medium-Term Note Program, (P)B3

....Subordinate Medium-Term Note Program, (P)B2

....Senior Unsecured Medium-Term Note Program, (P)Ba3

..Outlook Actions:

....Outlook changed to Rating under Review from No Outlook

Issuer: Banco BPI S.A. (Santa Maria)

..Placed on Review for Downgrade:

....Long-term Counterparty Risk Assessment, Ba2(cr)

....Junior Subordinate Medium-Term Note Program, (P)B3

....Subordinate Medium-Term Note Program, (P)B2

....Senior Unsecured Medium-Term Note Program, (P)Ba3

..Outlook Actions:

....Outlook changed to Rating under Review from No Outlook

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks published in January 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Maria Jose Mori
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's places BPI's Ba3 senior and deposit ratings on review for downgrade
No Related Data.
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