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Rating Action:

Moody's takes rating actions on La Caixa and CaixaBank (former Criteria) following transfer of banking activities

01 Jul 2011

Madrid, July 01, 2011 -- Moody's Investors Service has today taken the following actions on Caja de Ahorros y Pensiones de Barcelona ("La Caixa", rated Aa2/Prime-1/B-) and CaixaBank (former Criteria CaixaCorp -- "Criteria"-, rated A2 on review for possible upgrade), in response to the transfer of La Caixa's banking activities to CaixaBank that has taken place on June 30, 2011:

i) Moody's has upgraded the long-term issuer rating of CaixaBank (former Criteria) to Aa2 from A2 and has assigned a standalone Bank Financial Strength Rating ("BFSR") of B- (which maps to an A1 on the long-term rating scale) to the entity. The outlook on all ratings is negative. This rating action completes the rating review process initiated on January 28, 2011.

ii) Additionally, Moody's has affirmed the ratings for all the deposits and the debt issues which have been assumed by Caixabank upon completion of the transfer from LaCaixa, with the following ratings: the senior debt and deposit ratings at Aa2/Prime-1; the subordinated debt ratings one notch below the senior ratings at Aa3, and the preference shares at four notches below the standalone BFSR at Baa2(hyb). The outlook on all these ratings is negative.

iii) At the same time, Moody's has downgraded the long-term issuer rating of La Caixa to A1 from Aa2, and the rating on those subordinated debt obligations - which have not been assumed by CaixaBank - to A2 from Aa3, all with a negative outlook. Moody's has also withdrawn La Caixa's BFSR at B-.

DETAILS OF THE TRANSACTION

On January 27, the board of directors of both La Caixa and Criteria, a majority owned subsidiary of La Caixa and now renamed CaixaBank - agreed on the transformation of Criteria into a bank by transferring all of La Caixa's banking activities to Criteria, with the exception of its real estate assets and EUR 8.6 billion of net long-term debt. In exchange, Criteria will transfer to La Caixa part of its industrial stakes and EUR 2 billion new shares of the entity. Subsequent to these transactions, Criteria will be converted into a bank from its current holding company status. La Caixa, which will maintain its savings bank charter, will continue to manage its existing social welfare fund as well as the remaining industrial portfolio which has been transferred from Criteria/Caixabank .

This transfer was approved by La Caixa's general assembly and Criteria's shareholders' meeting, that took place in April and May 2011 respectively, and has been made effective on June 30, 2011.

As of today, with this transfer CaixaBank has total assets of EUR 265 in its balance sheet.

RATINGS RATIONALE

UPGRADE OF CAIXABANK'S LONG-TERM ISSUER RATING AND ASSIGNMENT OF BFSR

• Moody's decision of upgrading CaixaBank's long-term issuer rating to Aa2 with a negative outlook from A2 on review for possible upgrade, as well as the assignment of a B- BFSR, follows the effective conversion of Criteria into a bank -- CaixaBank, to which la Caixa has transferred all of its banking business, with the exception of its real estate assets and EUR 8.6 billion of net long-term debt -- from a holding company status. In Moody's view, the credit profile of Caixabank in essence is comparable to that of the previous credit profile of La Caixa, with some differences which however did not warrant a rating differentiation: With EUR 265 billion in assets, CaixaBank enjoys a pro-forma core capital ratio of 10.9% -- which is stronger than that of the existing group of 9.3% -- following mainly the issuance of EUR 1.5 billion mandatory convertible bonds that has taken place in June 2011.

• The stronger credit profile of CaixaBank versus former La Caixa is furher reinforced by the fact that La Caixa will not transfer to CaixaBank its portfolio of real estate assets. Most of these assets had entered the balance sheet of La Caixa as a result of repossessions or payment in kind for outstanding interest or principal payments by real estate developers and other customers and most are likely to be exposed to further impairments.

• Moreover, moving to a commercial bank status allows CaixaBank to access equity capital markets and to be subject to market discipline.

We note, however, that both entities are within the same corporate structure, with La Caixa actually holding a majority stake in CaixaBank, and as such the bank could therefore be affected by potential asset quality and liquidity problems that may emerge at the parent level.

This notwithstanding, Moody's views positively the steps taken by CaixaBank to reinforce its independence and ensure that all relationships between La Caixa and CaixaBank are at market conditions.

The negative outlook on CaixaBank's rating is consistent with the negative outlook on the Spanish financial system which continues to provide a challenging backdrop for Caixabank's operations. The negative outlook also reflects the existing negative outlook on the Kingdom of Spain.

AFFIRMATION OF LA CAIXA'S RATINGS THAT HAVE BEEN ASSUMED BY CAIXABANK

As a result of the completion of the transfer, the rating on the deposit, senior and dated subordinated debt obligations and preference shares of La Caixa, which have been assumed by CaixaBank, have been affirmed at existing levels.

DOWNGRADE OF LA CAIXA'S LONG-TERM ISSUER RATING AND WITHDRAWAL OF BFSR

Although La Caixa has maintained its current legal status of a savings bank, it will neither take deposits nor carry out any banking activity. This transformation produces a structural subordination of La Caixa's current creditors to those of the operating bank (i.e. CaixaBank) as the payment of La Caixa's debt will be largely dependent on the dividends upstreamed from CaixaBank which will be La Caixa's most significant revenue source (together with other revenue sources arising from other security holdings in its books).

This dependence is somewhat mitigated by the long-term maturities of La Caixa's debt (EUR 2.4 billion of government guaranteed debt in 2012 and EUR 6.2 billion of subordinated debt maturing mainly in 2019 and 2020).

In addition to structural subordination, the two notch rating differential between CaixaBank and La Caixa also factors the risk stemming from La Caixa's portfolio of real estate assets which could be subject to additional impairments. Although the size of these non-earning assets is relatively small compared to the total asset size of La Caixa, creditors are exposed to the potential impairment risk of these assets, which could in some of Moody's stress scenarios for these assets exceed the value of yearly upstreamed dividends and therefore create a higher reliance on the operating company to make extraordinary dividend payments to fund any potential annual income shortfall.

The negative outlook on La Caixa's rating follows Moody's decision of assigning a negative outlook to the rating of the operating company (CaixaBank) as well as to the negative outlook on the Kingdom of Spain.

At the same time, Moody's has downgraded the subordinated debt rating of La Caixa to A2 from Aa3 and has maintained the Aa2 rating for the government guaranteed debt, all ratings with a negative outlook.

Moody's has also withdrawn the BFSR of La Caixa at B-.

The principal methodologies used in this rating 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 2007.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Moody's adopts all necessary measures so that the information it uses in assigning a rating 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 entity or its related third parties within the three years preceding the credit rating action. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Madrid
Maria Cabanyes
Senior Vice President
Financial Institutions Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Johannes Wassenberg
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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 takes rating actions on La Caixa and CaixaBank (former Criteria) following transfer of banking activities
No Related Data.
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