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I AGREE
09 Dec 2010
Senior debt and Financial Strength ratings of Banif and Caixa Economica Montepio Geral affirmed.
Madrid, December 09, 2010 -- Moody's Investors Service has today announced that it will review for
possible downgrade the standalone Bank Financial Strength Ratings as well
as the senior and junior debt ratings of the Portuguese banks listed below.
At the same time, Moody's affirmed the Baa3 senior debt ratings
and the Bank Financial Strength Ratings ("BFSR") of D and
D-, respectively, of Caixa Economica Montepio Geral
and Banif -- Banco Internacional do Funchal.
RATING RATIONALE
Moody's said that the review for possible downgrade of the Portuguese
banks' standalone BFSRs was triggered by a combination of (i) their
high reliance on central bank liquidity while the international wholesale
markets remain mostly shut to Portuguese banks; (ii) the Portuguese
government's planned austerity measures and the possible impact
these measures may have on both earnings and asset quality of the banks;
(iii) the higher level of uncertainty and reduced predictability of the
operating environment for the banks, which makes increased and protracted
government support of some of these banks more likely than previously
anticipated.
Accordingly, the review of the BFSRs will focus on the banks'
ability to access market funding and the cost of the ongoing central bank
liquidity support, and the banks' individual strategies to
reduce their reliance on these funding sources. At the same time,
the review will take into consideration the possible impact of the planned
austerity measures on banks' credit metrics against the background
of an uncertain growth trajectory for the Portuguese economy.
As indicated by the fact that the lower rated BFSRs of both Montepio and
Banif have been affirmed, we would not expect to lower the standalone
ratings of any of the banks below the D category (mapping to the Baa3
to Ba3 range). We believe that this level, which implies
modest intrinsic financial strength potentially requiring some outside
support at times, already incorporates the liquidity and asset performance
levels that triggered today's rating actions on the remaining banks.
Other things being equal, rating downgrades of the banks'
standalone financial strength would place downward pressure on the banks'
senior debt ratings, which have therefore also been placed on review
for possible downgrade. Moody's expects that ongoing support
by the Portuguese government is likely to mitigate some of the pressure
on senior debt ratings, which should ensure that the banks retain
a credit profile that is still commensurate with investment grade ratings.
It is for this reason that the Baa3 long-term senior ratings of
Banif and Montepio have not been placed on review. Moody's
has a negative outlook on these two banks to reflect the uncertainty in
their operating environment and the significant market pressure that the
Portuguese banking system continues to face.
The review of BPN's Baa3 debt rating for downgrade reflects the
fact that the government was unsuccessful in its second attempt to privatise
the bank which has increased, in Moody's view, the probability
of a liquidation scenario for BPN. The review will look at the
next steps the government will take to solve the future of BPN.
Over the course of the review period, Moody's will also assess
the extent to which systemic support continues to remain applicable to
more junior capital instruments of Portuguese banks. We note a
developing pattern of policy initiatives across Europe that either has
imposed selective losses on subordinated debt, most recently in
the case of Ireland, or proposes to enable regulators the ability
to do so more prospectively going forward. Accordingly, Moody's
is reviewing for downgrade the subordinated debt ratings of Banif and
Montepio, while their senior ratings and BFSRs have been affirmed.
In Moody's opinion, should the government be forced to support
banks by injecting additional capital, it might well follow the
precedent currently being established elsewhere and look to offset this
in part through burden-sharing with junior creditor classes.
The following ratings have been placed under review for possible downgrade:
- Caixa Geral de Depositos ("CGD"): on review
are BFSR of D+ (mapping to Baa3), A1/P-1 ratings for
senior debt and deposit, A2 for subordinated debt, Baa2 for
junior subordinated debt and Ba1 for Tier 1 securities.
- Banco Santander Totta ("BST"): on review are
BFSR of C (mapping to A3), A1/P-1 ratings for senior debt
and deposit, A2 for subordinated debt and A3 for junior subordinated
debt; the ratings continue to incorporate unchanged high support
assumptions from its parent, Banco Santander S.A.
(Aa2/P-1/B-), which is not subject to the review.
- Banco Espirito Santo ("BES"): on review are
BFSR of C- (mapping to Baa2), A2/P-1 ratings for senior
debt and deposit, A3 for subordinated debt, Baa3 for junior
subordinated debt and Ba2 for Tier 1 securities.
- Banco BPI ("BPI"): on review are BFSR of C-
(mapping to Baa2), A2/P-1 ratings for senior debt and deposit,
A3 for subordinated debt, Baa3 for junior subordinated debt ratings
and Ba2 for Tier 1 securities rating.
- Espirito Santo Financial Group ("ESFG"): on
review are Baa1/P-2 issuer rating, Baa2 ratings for subordinated
debt and Ba3 for preferred securities.
- Banco Comercial Portugues ("BCP"): on review
are BFSR of D+ (mapping to Baa3), A3/P-2 ratings for
senior debt and deposit, Baa1 for subordinated debt ratings and
Ba3 for Tier 1 securities rating.
- Caixa Economica Montepio Geral ("Montepio"):
on review are the Ba1 ratings for subordinated debt and the Ba3 for junior
subordinated debt. The BFSR of D (mapping to Ba2) and the Baa3/P-3
debt and deposit ratings were affirmed with a negative outlook.
- Banif-Banco Internacional do Funchal ("BANIF"):
on review are the Ba1 ratings for subordinated debt and the B1 for junior
subordinated debt. The BFSR of D- (mapping to Ba3),
the Baa3/P-3 debt and deposit ratings and the B3 for Tier 1 securities
were affirmed with a negative outlook.
- Banco Itau Europa ("BIE"): on review are BFSR
of C- (mapping to Baa2), Baa1/P-2 ratings for senior
debt and deposit, Baa2 for subordinated debt and Baa3 for junior
subordinated debt.
- Banco Portugues de Negocios ("BPN"): on review
are Baa3/P-3 ratings for deposit ratings. The BFSR of E
(mapping to Caa1) was affirmed with a developing outlook.
The principal methodologies used in rating these issuers are "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
in November 2009 . Other methodologies and factors that may have
been considered in the process of rating these issuers can also be found
on Moody's website.
Headquartered in Lisbon, Portugal, CGD reported total unaudited
consolidated assets of EUR126.6 billion as of 30 September 2010.
Headquartered in Lisbon, Portugal, BST reported total unaudited
consolidated assets of EUR49.7 billion as of 30 June 2010.
Headquartered in Lisbon, Portugal, BES reported total unaudited
consolidated assets of EUR82.1 billion as of 30 September 2010.
Headquartered in Lisbon, Portugal, BPI reported total unaudited
consolidated assets of EUR47.0 billion as of 30 September 2010.
Headquartered in Luxembourg, ESFG reported total unaudited consolidated
assets of EUR85.4billion as of 30 September 2010.
Headquartered in Oporto, Portugal, BCP reported total unaudited
consolidated assets of EUR99.4 billion as of 30 September 2010.
Headquartered in Lisbon, Portugal, Montepio reported total
unaudited consolidated assets of EUR17.7 billion as of 30 June
2010.
Headquartered in Funchal, Portugal, Banif reported total unaudited
consolidated assets of EUR12.0 billion as of 30 June 2010.
Headquartered in Lisbon, Portugal, BIE reported total unaudited
consolidated assets of EUR5.2 billion as of 30 September 2010.
Headquartered in Lisbon, Portugal, BPN had total audited consolidated
assets of EUR 7.5 billion as at 31 December 2009.
Madrid
Olga Cerqueira
Asst Vice President - Analyst
Financial Institutions Group
London
Johannes Wassenberg
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
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Moody's Investors Service Espana, S.A.
Barbara de Braganza, 2
Madrid 28004
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JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews for possible downgrade ratings of Portuguese banks
No Related Data.
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