Banks' standalone credit assessments currently above the sovereign rating likely to decline, in line with Moody's global guidance
London, 05 April 2012 -- Moody's Investors Service has today placed on review for downgrade 14
financial institutions in Jordan, Lebanon, Pakistan and Ukraine,
whose standalone credit assessments are currently positioned above their
domicile countries' sovereign debt ratings. Today's announcements
reflect Moody's revised assessment of the linkage between the credit profiles
of sovereigns and financial institutions globally, which is further
discussed in the rating implementation guidance "How Sovereign Credit
Quality May Affect Other Ratings" published on 13 February, 2012.
Consistent with this guidance, Moody's expects to position the standalone
credit assessments of most banks globally at (or below) the rating of
the sovereign where the bank is domiciled.
Moody's expects to conclude the reviews within approximately three months.
A detailed list of the banks and ratings affected by this announcement
can be found at the end of the press release.
RATINGS RATIONALE
- REVIEW OF STANDALONE RATINGS ABOVE THE SOVEREIGN DEBT RATING
Moody's believes that the creditworthiness of financial institutions with
low cross-border operational diversification and/or high balance-sheet
exposures to the debt of their domestic sovereign is closely linked to
that sovereign's credit strength. Banks with these characteristics
are unlikely to have standalone credit assessments above the sovereign,
which is often viewed as the lowest credit risk in the local market or
currency.
During the reviews, Moody's will assess the degree to which the
issuer's standalone credit profile is correlated with that of the sovereign.
The reviews will take into account (i) the extent to which the banks'
business depends on the domestic macroeconomic and financial environment;
(ii) the degree of reliance on market-based, and therefore
more confidence-sensitive, funding; and (iii) direct
or indirect exposures to domestic sovereign debt, compared with
their capital bases.
Overall, for most of the affected banks, Moody's expects that
most standalone credit assessments will be rated at the same level as
their domicile sovereigns' debt ratings, once the rating agency
has concluded the reviews. Exceptions may arise in cases where
banks' linkages with sovereign risk are mitigated by high levels
of cross-border diversification (operations and earnings) and low
levels of sovereign debt holdings.
- LOCAL-CURRENCY DEPOSIT AND DEBT RATINGS
Moody's ratings incorporate assumptions about external support through
its joint-default analysis (JDA) methodology. As a result,
issuers whose standalone credit strength is positioned below or at the
sovereign rating level will continue to benefit from the availability
of external sources of support, either from a higher-rated
foreign parent and/or government (or systemic) support, where applicable.
Moody's expects that some banks' local-currency deposit and
debt ratings may continue to benefit from rating uplift due to systemic
or parental support assumptions; however, the degree of uplift
will depend on their systemic importance or shareholder composition that
includes a higher-rated parent. The level of external support
and the positioning of the standalone credit assessment will determine
the extent of each bank's local-currency deposit and debt
rating downgrades.
- FOREIGN-CURRENCY DEPOSIT AND DEBT RATINGS
The foreign-currency deposit ratings of some of the affected banks
are lower than their standalone credit assessments, as they are
constrained by relatively low foreign-currency deposit ceilings
in their respective countries. Therefore, Moody's expects
that these ratings are unlikely to be affected by the downgrade of the
banks' standalone credit assessments.
In certain cases, the foreign-currency debt ratings are positioned
higher than the foreign-currency deposit ratings. As a result,
some banks' foreign-currency debt ratings will be affected
by their standalone credit assessment downgrades.
KEY RATING DRIVERS
For the affected 14 banks, the key rating drivers are (i) the level
of cross-border diversification of their operations; (ii)
the level of balance-sheet exposure to domestic sovereign debt,
compared with their capital bases; (iii) franchise resilience and
intrinsic strength within the operating environment; (iv) shareholder
composition and the rating of the parent bank incorporated in Moody's
JDA; and/or (v) the assumptions for systemic support available to
a bank in case of need.
LIST OF RATING ACTIONS
The following rating actions were taken:
JORDAN
- Arab Bank's Baa1/Prime-2 local currency long and
short-term deposit ratings and C- Bank Financial Strength
Rating (BFSR) placed on review for downgrade; Ba3 foreign currency
deposit rating unaffected. Arab Bank's Dubai branch's
Baa1/Prime-2 foreign currency long and short-term deposit
ratings also placed on review for downgrade. The current rating
review for downgrade on Arab Bank's 100% owned Australian
subsidiary (Arab Bank Australia Limited), initiated on 2 March 2012,
will also be expanded to reflect the impact of today's actions.
Arab Bank Australia's Baa2 senior unsecured debt ratings currently
receive two notches of parental support uplift.
- Housing Bank for Trade and Finance (HBTF)'s Baa2/Prime-2
local currency long and short-term deposit ratings and D+
BFSR placed on review for downgrade; Ba3 foreign currency long-term
deposit rating unaffected.
LEBANON
- Bank Audi's Ba3 local currency long-term deposit
rating, D- BFSR and Aa1.lb national scale long-term
deposit rating placed under review for downgrade; B1/Not Prime foreign
currency long and short-term deposit ratings, Not Prime local
currency short-term rating and LB-1 national scale short-term
deposit rating unaffected.
- Blom Bank's Ba3 local currency long-term deposit
rating, D- BFSR and Aa1.lb national scale long-term
deposit rating placed under review for downgrade; B1/Not Prime foreign
currency long and short-term deposit ratings, Not Prime local
currency short-term rating and LB-1 national scale short-term
deposit rating unaffected.
- Byblos Bank's Ba3 local currency long-term deposit
rating, B1 foreign currency subordinated debt rating, D-
BFSR and Aa2.lb national scale long-term deposit rating
placed on review for downgrade; B1/Not Prime foreign currency long
and short-term deposit ratings, Not Prime local currency
short-term rating and LB-1 national scale short-term
deposit rating unaffected.
PAKISTAN
- Allied Bank Limited's B1 local currency long-term
deposit rating placed on review for downgrade and Baseline Credit Assessment
of b1 (mapped from E+ BFSR) to be reassessed; B3 foreign currency
long-term deposit rating and Not Prime short term ratings unaffected.
- Habib Bank Ltd's B1 local currency long-term deposit
rating placed on review for downgrade and Baseline Credit Assessment of
b1 (mapped from E+ BFSR) to be reassessed ; B3 foreign currency
long-term deposit rating and Not Prime short term ratings unaffected.
- MCB Bank Limited's Ba3 local currency long-term
deposit rating and D- BFSR placed on review for downgrade;
B3 foreign currency long-term rating deposit rating and Not Prime
short term ratings unaffected.
- National Bank of Pakistan's Ba3 local currency long-term
deposit rating and D- BFSR placed on review for downgrade;
B3 long-term foreign-currency deposit rating and Not Prime
short-term ratings unaffected.
- United Bank Ltd's B1 local currency long-term deposit
rating placed on review for downgrade and Baseline Credit Assessment of
b1 (mapped from E+ BFSR) to be reassessed; B3 foreign currency
long-term deposit rating and Not Prime short term ratings unaffected.
UKRAINE
- OTP Bank Ukraine's Ba2 local currency long-term
deposit rating and D- BFSR placed on review for downgrade;
B3 foreign currency deposit rating, Aa1.ua national scale
long-term deposit rating and Not Prime short-term deposit
ratings unaffected.
- Privatbank's Ba3 local currency long-term deposit
rating, B1 foreign currency long-term senior unsecured debt
rating, B1 foreign currency long-term subordinated debt rating,
D- BFSR and Aa1.ua national scale long-term deposit
rating placed on review for downgrade; B3 foreign currency deposit
rating and Not Prime short-term deposit ratings unaffected.
- Raiffeisen Bank Aval's D- BFSR placed on review
for downgrade. The current review for downgrade of its Ba1 long-term
local-currency deposit and senior unsecured debt ratings,
initiated on 21 February 2012, will also be extended to reflect
today's actions. B3 foreign currency deposit rating,
Aa1.ua national scale long-term deposit rating and Not Prime
short-term deposit ratings unaffected.
- Ukreximbank's Ba3 local currency long-term deposit
and senior unsecured debt ratings, B1 foreign currency long-term
senior unsecured debt rating, B1 foreign currency long-term
subordinated debt rating and D- BFSR placed on review for downgrade.
B3 foreign currency deposit rating and Not Prime short-term deposit
ratings unaffected.
PRINCIPAL 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: A Refined
Methodology published in March 2012. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
Moody's National Scale Ratings (NSRs) are intended as relative measures
of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale ratings in that they are not globally
comparable with the full universe of Moody's rated entities, but
only with NSRs for other rated debt issues and issuers within the same
country. NSRs are designated by a ".nn" country
modifier signifying the relevant country, as in ".mx"
for Mexico. For further information on Moody's approach to national
scale ratings, please refer to Moody's Rating Methodology published
in March 2011 entitled "Mapping Moody's National Scale Ratings to
Global Scale Ratings".
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 deposit ratings of rated entities National Bank of Pakistan,
United Bank Ltd, and Habib Bank Ltd were initiated by Moody's and
were not requested by these rated entities.
Rated entities National Bank of Pakistan, United Bank Ltd,
and Habib Bank Ltd or their agent(s) participated in the rating process.
These rated entities or their agent(s), if any, provided Moody's
access to the books, records and other relevant internal documents
of the rated entities.
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 the rating for Arab Bank, Housing
Bank for Trade and Finance, Bank Audi, Blom Bank, and
Byblos Bank are the following: parties involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Information sources used to prepare the rating for Allied Bank,
Habib Bank, MCB Bank, National Bank of Pakistan, and
United Bank are the following: public information.
Information sources used to prepare the rating for OTP Bank Ukraine,
and Privatbank are the following: parties involved in the ratings,
parties not involved in the ratings, public information, and
confidential and proprietary Moody's Investors Service information,
Information sources used to prepare the rating for Raiffeisen Bank Aval,
and Ukreximbank are the following: parties involved in the ratings,
and public information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these reviews.
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.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating
analyst and the Moody's legal entity that has issued each of the
ratings.
Armen L. Dallakyan
Asst Vice President - 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
Yves J Lemay
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
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews 14 banks in Jordan, Lebanon, Pakistan, Ukraine for downgrade
