Subordinated debt downgraded by one notch and remains on review for downgrade; Rating actions follow downgrade of parent bank's ratings
London, 27 June 2012 -- Moody's Investors Service has today placed on review for downgrade Santander
UK's long and short-term A2/P-1 bank deposit and senior
debt ratings and the standalone bank financial strength rating (BFSR)
of C- (equivalent to a baa1 standalone credit assessment).
In addition, Moody's downgraded by one notch Santander UK's
dated subordinated debt ratings, the junior subordinated debt ratings,
and the preference shares ratings to Baa2, Baa3(hyb) and Baa3/Ba1(hyb),
respectively.
The review of Santander UK's ratings follows Moody's downgrade of
the bank deposit and senior debt ratings of Santander UK's parent (Banco
Santander S.A.) to Baa2/P-2 and of its standalone
credit assessment to baa2, all on review for downgrade (see "Moody's
downgrades Spanish banks" published on 25 June 2012 for more details).
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_143507
for the list of Affected Credit Ratings. This list is an integral
part of this press release and identifies each affected issuer.
For additional information on bank ratings, please refer to the
webpage containing Moody's related announcements: http://www.moodys.com/bankratings2012.
RATINGS RATIONALE
The downgrade of Banco Santander S.A.'s standalone
rating to C-/baa2, one notch below the standalone credit
assessment of Santander UK (C-/baa1), means that the ratings
of Santander UK will no longer benefit from any uplift from parental support.
Previously, Santander UK benefited from one notch of uplift to its
baa1 standalone credit assessment from parental support in addition to
one notch of systemic support.
Moody's review of Santander UK's A2/P-1 senior debt
and bank deposit ratings will therefore focus on whether Santander UK's
role in the UK market could justify two notches of systemic support over
its baa1 standalone credit assessment. A further factor in the
senior debt and long-term bank deposit ratings will be the future
level of the UK bank's standalone rating, which has also been
placed on review for downgrade in line with the review of Banco Santander
S.A.
The review of the bank's C-/baa1 standalone credit assessment will
focus on the independence and resilience of the UK bank's franchise
and financial strength in the event that the creditworthiness of the parent
is further affected and its ratings lowered. Generally, Moody's
is comfortable with subsidiaries' standalone credit assessments
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 UK insulates Santander UK from
potential adverse developments in Spain will also be factored into Moody's
review of Santander UK's ratings.
Moody's has downgraded by one notch all of Santander UK's subordinated
debt, junior subordinated debt and preference share ratings (many
of which are issued through subsidiaries -- see the attached
link for a complete list of affected ratings). This is because
these debt instruments are notched down from the 'adjusted'
standalone credit assessment (which includes parental support).
Moody's says that following the removal of parental support ratings
uplift, the adjusted standalone credit assessment is now baa1,
rather than a3. These junior instruments are also now on review
for further downgrade, and will move in line with the standalone
ratings of Santander UK.
WHAT COULD MOVE THE RATINGS UP/DOWN
As a result of the review for downgrade, upwards pressure on the
bank's senior debt and deposit ratings is unlikely at the current
time. A downgrade of the bank's standalone rating is likely
to lead to a downgrade of the senior debt and deposit ratings.
In addition, downwards pressure on Santander UK's senior debt
and deposit ratings might develop if Moody's decides not to increase
the level of systemic support it incorporates into the ratings of Santander
UK.
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. Other methodology used includes
Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated
Debt, published in November 2009. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
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.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their related third parties within
the two years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided
to entities rated by MIS's EU credit rating agencies" on the
ratings disclosure page on our website www.moodys.com for
further information.
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.
Ross Abercromby
Vice President - Senior Analyst
Financial Institutions Group
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
Johannes Wassenberg
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
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London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's places Santander UK's A2/P-1/C- ratings on review for downgrade
