Madrid, July 19, 2013 -- Moody's Investors Service has today placed on review for downgrade
the Ba1 long-term deposit ratings of Caja Laboral Popular Coop.
de Credito (Caja Laboral), and its D+ standalone bank financial
strength rating (BFSR; equivalent to a ba1 baseline credit assessment
or BCA).
The rating review of the standalone BFSR reflects Moody's concerns
over the bank's asset quality, particularly in the corporate
segment, where the rating agency expects further asset quality deterioration,
not only affecting real-estate companies but also those operating
in other economic sectors.
For additional insight about our broader view on the Spanish banking system,
please refer to http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_155899
"Credit profiles of many Spanish banks continue to deteriorate given
weakness of domestic economy".
RATINGS RATIONALE
--- REVIEW OF STANDALONE BFSR
The review of Caja Laboral's D+ standalone BFSR is driven by
Moody's concerns over the bank's asset quality, with
problem loans having shown a significant increase in 2012 and the first
quarter of 2013 -- the problem loan ratio increased from
4.8% at year-end 2011 to 7.8% at end-March
2013 --, even if they still compare well to the Spanish
banking system average. The increase in its problem loans has been
chiefly driven by the deterioration of the corporate loan book (24%
of total lending as of end-March 2013), not only on those
exposures related to the real estate and construction sectors, but
also affecting loans extended to companies in other economic sectors.
Moody's expects Caja Laboral to experience further asset quality
deterioration within its corporate loan book. Moody's believes
that the deterioration will continue to go beyond the real-estate
related exposures, where risks persist given the still ongoing adjustment
of the Spanish housing market, but that it will also affect other
types of corporate loans. The deterioration is increasingly driven
by the weak performance of the domestic economy and subdued domestic consumption
and investment, only offset to a lesser extent by the good performance
of the export sector.
Furthermore, Moody's notes that the negative conditions in
the Spanish economy and the very high unemployment rate will continue
to drive a deterioration in loans granted to individuals, which
-- at 75% -- represent the bulk of Caja Laboral's
loan book.
Moody's acknowledges that Caja Laboral's total non-performing
loan ratio compares well with those of domestic peers -- even considering
other type of non-earning assets like repossessed real estate properties,
which amounted to 4.3% of the bank's total loan book
at end 2012 compared to a system-average that we estimate at almost
7% of total loans. However, in light of the actual
- and anticipated - deterioration, the rating agency
notes that the bank's credit profile may no longer be consistent
with a standalone BCA of ba1, which is at the top end among Spanish
rated banks.
In its review, Moody's will focus on the ability of Caja Laboral
to generate sufficient earnings to offset any increase in provisioning
requirements and to ensure a sufficiently resilient capital base.
--- REVIEW OF THE DEPOSITS RATINGS
The review for downgrade of Caja Laboral's deposit ratings was triggered
by the review for downgrade of its standalone BFSR, without any
visibility that external support could potentially compensate for a weaker
intrinsic credit profile.
WHAT COULD CHANGE THE RATING UP/DOWN
The ratings have been placed on review for downgrade, indicating
downward pressure. This pressure may intensify beyond what has
been described above if the economic conditions in Spain deviate significantly
from Moody's current GDP growth projections for 2013 and 2014,
a GDP decline of 1.4% in 2013 and very weak growth of less
than 1% in 2014.
Given the review for downgrade, Moody's currently does not
expect any upward rating pressure.
Headquartered in Mondragón, Spain, Caja Laboral reported
total, audited consolidated assets of EUR25 billion at the end of
2012.
The principal methodology used in this rating was Global Banks published
in May 2013. Please see the Credit Policy 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 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 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 rating action, and
whose ratings may change as a result of this 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.
Alberto?Postigo
Vice President - Senior Analyst
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
Johannes?Felix?Wassenberg
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 Caja Laboral's Ba1 ratings on review for downgrade