Rating actions follow the change in the country's Macro Profile to 'Strong-' from 'Moderate+'
Madrid, May 10, 2017 -- Moody's Investors Service has today taken rating actions on 10 Spanish
banking groups, prompted by the rating agency's change of the banking
Macro Profile of Spain (Baa2 stable) to "Strong-" from "Moderate+",
as well as the continued improvement in the banks' credit fundamentals,
notably asset risk. For a detailed analysis of Spain's Macro Profile
please click on the following link:
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1066250
"The main driver for the rating actions is the banking system's
improved credit conditions following the deleveraging of the private sector.
This positive development has been reflected in an improvement in Moody's
Macro Profile for Spain" says Maria Cabanyes, a Senior Vice President
at Moody's. "The rating actions also incorporate Moody's
expectation of a sustained improvement in the banks' asset risk
metrics against a backdrop of solid economic growth in Spain and the progressive
recovery of the country's real estate market".
Among the actions taken today by Moody's on the affected banks are
the following:
- CaixaBank, S.A. (CaixaBank): long-term
deposit ratings affirmed at Baa2 with a positive outlook and long-term
senior debt ratings affirmed at Baa2 with a stable outlook. Baseline
Credit Assessment (BCA) and adjusted BCA affirmed at ba1.
- Banco Sabadell, S.A. (Banco Sabadell):
long-term deposit ratings affirmed at Baa2 with a stable outlook
and long-term senior debt ratings affirmed at Baa3 with a positive
outlook. BCA and adjusted BCA affirmed at ba2.
- Bankia S.A. (Bankia): long-term deposit
ratings upgraded to Baa3 from Ba2 and long-term senior debt ratings
to Ba1 from Ba3, both with a stable outlook. BCA and adjusted
BCA upgraded to ba2 from b1.
- Unicaja Banco S.A. (Unicaja): long-term
deposit ratings affirmed at Ba3 with a positive outlook. BCA and
adjusted BCA affirmed at b1.
- Ibercaja Banco S.A. (Ibercaja): long-term
deposit ratings upgraded to Ba3 from B1 with a stable outlook.
BCA and adjusted BCA upgraded to ba3 from b1.
- Kutxabank, S.A. (Kutxabank): long-term
deposit ratings upgraded to Baa3 from Ba1 with a positive outlook and
senior debt program to (P)Baa3 from (P)Ba1. BCA and adjusted BCA
upgraded to baa3 from ba1.
- ABANCA Corporacion Bancaria, S.A. (ABANCA):
long-term deposit ratings upgraded to Ba3 from B2 with a stable
outlook. BCA and adjusted BCA upgraded to ba3 from b2.
- Banco Cooperativo Espanol, S.A. (Banco Cooperativo):
long-term deposit ratings upgraded to Baa3 from Ba1 with a stable
outlook. BCA upgraded to ba1 from ba2 and adjusted BCA to baa3
from ba1.
- Banca March S.A. (Banca March): long-term
deposit ratings upgraded to A3 from Baa1 with a stable outlook.
BCA and adjusted BCA upgraded to baa2 from baa3.
- Caja Rural de Navarra: long-term deposit ratings
affirmed at Baa2 with a stable outlook. BCA and adjusted BCA affirmed
at baa2 (BCA constrained at the level of the Spanish sovereign rating
- Baa2 stable).
The ratings and outlooks of other Moody's rated Spanish banks are
unaffected by the country's higher Macro Profile.
Details of the rationales for individual bank rating actions are provided
later in this Press Release.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_195549
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Moody's rating methodology for banks includes an assessment of each individual
country's operating environment, expressed as a Macro Profile,
which is designed to capture system-wide factors that are predictive
of the propensity of banks to fail. The Macro Profile assigned
to each bank informs the financial factors, which are key inputs
into the determination of each bank's BCA.
(1) CHANGE IN THE MACRO PROFILE TO 'STRONG-' FROM 'MODERATE+'
REFLECTS IMPROVING OPERATING ENVIRONMENT IN SPAIN AND EXERTS UPWARD PRESSURE
ON BANKS' RATINGS
Moody's has changed Spain's Macro Profile to 'Strong-' from
'Moderate+' to reflect the improvements in the banks' credit conditions
that have been driven by the deleveraging of the private sector.
In improving Spain's Macro Profile, Moody's has taken
into account the significant reduction in the debt burden of the domestic
private sector, after it materially increased in the years prior
to the financial crisis. Starting from leverage levels materially
above the euro area average, the private debt outstanding to gross
domestic product ratio fell to 166% as of the end of 2016,
which is now in line with the euro area average after declining by almost
30 percentage points over the last three years.
Consequently, Moody's assessment of more favorable operating
conditions for banks in Spain, in combination with ongoing improvements
in other credit fundamentals, notably asset quality and capital,
has resulted in rating upgrades by one to two notches or rating affirmations
for the banks affected by today's rating actions.
(2) SPECIFIC ANALYTICAL FACTORS FOR THE AFFECTED BANKS
-- CAIXABANK
Moody's has today affirmed CaixaBank's senior debt and deposit
ratings of Baa2. The outlook on the long-term deposit ratings
has been changed to positive from stable while the outlook for the long-term
senior debt remains stable.
The affirmation of the ratings reflects: (1) the affirmation of
the bank's ba1 BCA; (2) the rating uplift from Moody's
Advanced Loss Given Failure (LGF) analysis (two notches for junior deposits
and one notch for senior debt); and (3) the one-notch uplift
on the bank's senior debt rating from Moody's assumption of
moderate government support.
CaixaBank's BCA of ba1 reflects its stable revenue-generation
capacity, underpinned by its leading retail franchise in Spain,
strong liquidity and funding profile. The group's high level of
problematic exposures is a key constraint on the ba1 BCA.
The change in outlook of CaixaBank's long-term deposit rating
reflects Moody's expectation that the bank's credit profile
will continue to improve over the next 12 to 18 months. More specifically,
a higher BCA will be underpinned by: (1) a reduction in the high
stock of problematic assets, namely non-performing loans
and real-estate assets which, despite ongoing progress,
remain at very high levels; (2) stronger Tangible Common Equity (TCE)
levels; and (3) a sustained recovery of recurrent profitability levels
while the bank's funding and liquidity profile remain at sound levels.
The stable outlook on the bank's long-term senior debt ratings
reflects Moody's consideration that any upward pressure on the bank's
standalone BCA will not translate into an improvement of the bank's
Baa2 senior debt ratings. At this level, CaixaBank will continue
to benefit from one-notch uplift resulting from the rating agency's
LGF analysis but no uplift from the moderate government support assumptions
as the bank's senior debt rating would be aligned with Spain's
Baa2 sovereign rating.
-- BANCO SABADELL
As part of today's rating action, Moody's has affirmed
Banco Sabadell's Baa2 long-term deposit ratings and its Baa3
long-term senior debt rating. The outlook on the bank's
long-term deposit ratings is stable and the outlook on the bank's
long-term senior debt rating has been changed to positive from
stable.
The affirmation of Banco Sabadell's long-term Baa2 deposit
rating and its Baa3 long-term senior debt rating, reflects:
(1) the affirmation of the bank's ba2 BCA; (2) the uplift from
Moody's Advanced LGF analysis; and (3) one notch of uplift
for the deposit and senior debt ratings from the rating agency's
assumptions of moderate government support.
Banco Sabadell's ba2 standalone BCA reflects the bank's improved
credit fundamentals, notably in terms of asset risk, with
a sustained decline in the stock of problematic assets. Moody's
expects this trend to continue in 2017, underpinned by the sound
growth prospects of the Spanish economy. The rating agency considers
that any pressure that could arise on the credit profile of Banco Sabadell's
UK subsidiary TSB Bank plc (TSB; deposits Baa2 negative; BCA
baa2), which has a very low credit risk profile but limited track
record and is following a rapid expansion, would be offset by the
positive trends in the Spanish operations, which represent close
to 80% of the group's assets.
The change in the outlook of Banco Sabadell's long-term senior
debt rating reflects Moody's expectation that the bank's credit
profile will continue to improve over the next 12 to 18 months.
The rating agency expects Banco Sabadell to continue reducing the stock
of problematic assets and gradually improve its profitability metrics
as the domestic operations continue to recover.
The stable outlook on Banco Sabadell's long-term deposit
ratings reflects Moody's consideration that any upward pressure
on the bank's standalone BCA will not translate into an improvement
of the bank's Baa2 deposit ratings. At this level,
Banco Sabadell's deposit rating will benefit from the uplift of
the rating agency's LGF analysis but no uplift from the moderate
government support assumptions as the bank's deposit rating is currently
aligned with Spain's Baa2 sovereign rating.
-- BANKIA
Moody's has upgraded Bankia's deposit ratings to Baa3/Prime-3
from Ba2/Not Prime and its long-term senior debt rating to Ba1
from Ba3 and has changed the outlook on the long-term ratings to
stable from positive.
The upgrade of the ratings reflects: (1) the two notch upgrade of
the bank's BCA to ba2 from b1; (2) Moody's Advanced LGF
analysis that provides one-notch uplift for deposits and no uplift
for senior debt from the bank's ba2 adjusted BCA; and (3) Moody's
assumption of moderate government support from Spain, which results
in a one notch uplift for both the deposit and senior debt ratings.
Bankia's ba2 BCA reflects the bank's improving credit fundamentals,
notably in terms of asset risk, capital and funding structure.
The bank's BCA remains constrained by: (1) the still high
volume of problematic exposures - measured as non-performing
loans (NPLs) + real estate assets + performing refinanced loans
- which accounted for 15.5% of the bank's loan
book and real estate assets and 87.9% of its shareholder
equity and loss reserves as of end-2016; and (2) the pressures
on the bank's recurrent profitability stemming mainly from the very
low interest rates environment - that affects not only the re-pricing
of the loan book but also the bank's large bond portfolio -
and subdued business growth
The outlook on Bankia's long-term deposit and debt ratings
is stable reflecting Moody's view that the current ratings already
capture expected performance of the bank's financial fundamentals.
-- UNICAJA
Moody's has affirmed Unicaja's Ba3 long-term deposit
rating and changed the outlook to positive from stable.
Unicaja's long-term deposit ratings of Ba3 reflect:
(1) the affirmation of its b1 BCA; and (2) the Advanced LGF analysis
that provides one notch of uplift from the bank's adjusted BCA of
b1 for the deposit ratings. There is no government support uplift
for these ratings, given Moody's assumption that the probability
of such support is low.
Unicaja's standalone b1 BCA reflects the bank's: (1)
sound liquidity profile underpinned by sizeable liquid assets; (2)
improving asset risk trend although the level of problematic assets is
still high; (3) modest recurrent profitability, which remains
challenged by the low interest rate environment and persisting subdued
business volumes; and (4) weak capitalization which is constrained
by a large amount of deferred tax assets (DTAs).
The positive outlook on Unicaja's Ba3 long-term deposit ratings
reflects Moody's view that the bank's credit profile will
be bolstered if it succeeds to conclude the planned capital increase for
a nominal value of EUR625 million. On 26 April 2017, Unicaja's
shareholders meeting approved the bank's IPO and capital increase.
-- IBERCAJA
Moody´s has today upgraded Ibercaja's long-term deposit
ratings to Ba3 from B1. The outlook on the long-term deposit
ratings is stable.
The upgrade of the bank's deposit ratings reflects: (1) the
upgrade of the bank's BCA and adjusted BCA to ba3 from b1;
and (2) Moody's Advanced LGF analysis that provides no uplift from
the bank's adjusted BCA. There is no government support uplift
for these ratings, given Moody's assumption that the probability
of such support is low.
Ibercaja's BCA of ba3 reflects the bank's sound franchise
in its home region of Aragon, Spain, and its favourable liquidity
position, with modest refinancing requirements and sizable liquid
assets. However, the BCA also reflects Ibercaja's challenges
and constrained financial flexibility following its acquisition of Caja
3 in 2013, namely in terms of asset risk and capital adequacy.
These indicators have nevertheless shown some improvement since the sharp
deterioration observed in 2013, on the back of the more favourable
economic environment in Spain.
The outlook on Ibercaja's long-term deposit ratings is stable,
reflecting Moody's view that all currently foreseen risks are captured
within the current credit rating.
-- KUTXABANK
Moody's has today upgraded Kutxabank's deposit ratings to
Baa3/Prime-3 from Ba1/Not Prime and the long-term senior
debt ratings of its supported entity Caja Vital Finance B.V.
to Baa3 from Ba1. The outlook on the long-term deposit and
senior debt ratings is positive.
The upgrade of the deposit and senior debt ratings reflects: (1)
the upgrade of the bank's BCA and adjusted BCA to baa3 from ba1;
and (2) Moody's Advanced LGF analysis that provides no uplift from
the bank's adjusted BCA of baa3. There is no government support
uplift for these ratings, given Moody's assumption that the probability
of such support is low.
Kutxabank's standalone baa3 BCA is underpinned by the bank's improving
asset risk trends, as well as its strong capital buffers and sound
liquidity position. The bank's BCA is constrained by its still
relatively high level of problematic exposures when compared to other
European banks at the same BCA level and modest profitability metrics
with ongoing pressures on top line revenues.
The positive outlook on Kutxabank's long-term deposit and senior
debt ratings primarily reflects Moody's expectation that Kutxabank will
be able to maintain current positive trends on its financial fundamentals.
The rating agency expects a further improvement of the bank's asset risk
and capital over the outlook period of 12-18 months, which
combined with resilient profit generation capacity could result in upward
pressure on Kutxabank's ratings.
In particular, a stronger assessment of Kutxabank's credit profile
could materialize if: (1) the NPL ratio declines below 6%
over the outlook period while the stock of foreclosed real estate assets
continues to gradually decline; (2) Moody's key capital metric --
TCE to risk-weighted assets ratio -- stands at around
13% (from 12.2% at end-December 2016);
and (3) profitability remains resilient and bottom line profits continue
to grow at the current pace.
-- ABANCA
Moody's has today upgraded ABANCA's long-term deposit
ratings to Ba3 from B2. The outlook on the long-term deposit
ratings has been changed to stable from positive.
The upgrade of the bank's deposit ratings reflects: (1) the
upgrade by two notches of the bank's BCA and adjusted BCA to ba3 from
b2; (2) Moody's Advanced LGF analysis that provides no uplift
from the bank's adjusted BCA. There is no government support uplift
for these ratings, given Moody's assumption that the probability
of such support is low.
ABANCA's BCA of ba3 reflects the bank's sound franchise in
its home region of Galicia, Spain, and its improved asset
risk indicators, with a decline in the NPL ratio of around 200 basis
points throughout 2016. The BCA also reflects the bank's
sound funding profile, with customer deposits covering the majority
of its funding needs. However, the BCA also takes into account
the bank's weak capital position constrained by a large amount of
DTAs, as well as its weak recurrent profitability, with a
high proportion of total profits stemming from non-recurrent financial
operations.
The outlook on ABANCA's long-term deposit ratings is stable,
reflecting Moody's view that the bank's financial fundamentals will
continue to show some improvement in 2017, but will remain consistent
with the BCA of ba3.
-- BANCO COOPERATIVO
Moody's has today upgraded Banco Cooperativo's deposit ratings
to Baa3/Prime-3 from Ba1/Not Prime. The outlook on the long-term
deposit ratings is stable.
The upgrade of the bank's deposit ratings reflects: (1) the
upgrade of the bank's BCA to ba1 from ba2 and of the adjusted BCA to baa3
from ba1; and (2) Moody's Advanced LGF analysis that provides
no uplift from the bank's adjusted BCA of baa3. There is no government
support uplift for these ratings, given Moody's assumption that
the probability of such support is low.
Banco Cooperativo's BCA of ba1 reflects: (1) the bank's moderate
risk profile, although its exposure to Spanish sovereign debt remains
high, encompassing concentration and some market risk; and
(2) its adequate liquidity profile. The bank's BCA is constrained
by Banco Cooperativo's very high leverage because of its role as a service
provider and its modest but stable profitability levels.
Banco Cooperativo is owned by the 38 rural co-operatives amalgamated
under the Asociacion Espanola de Cajas Rurales (AECR; unrated) and
by Germany-based DZ Bank AG (deposits Aa1 stable/senior unsecured
Aa3 positive, BCA baa2/Adjusted BCA a2). Banco Cooperativo's
purpose is to provide these rural co-operatives with a cost-effective
comprehensive range of financial services. Moody's believes there
is a high probability of support from these rural co-operatives
associated under the AECR, given Banco Cooperativo's role as central
treasury provider for this group of entities. As a result of this
affiliate support assessment, Banco Cooperativo's adjusted BCA is
baa3, one notch above the bank's BCA.
The stable outlook on Banco Cooperativo's long-term deposit ratings
reflects Moody's expectation that the improving operating environment
will support the stabilisation of the bank's financial fundamentals,
as well as the gradual improvement of those of the rural cooperatives
sector.
-- BANCA MARCH
Moody's has today upgraded Banca March´s long-term
deposit ratings to A3 from Baa1. The short-term deposit
ratings have been affirmed at Prime-2. The outlook on the
long-term deposit ratings is stable.
The upgrade of the bank's deposit ratings reflects: (1) the
upgrade of the bank's BCA and adjusted BCA to baa2 from baa3; and
(2) Moody's Advanced LGF analysis that provides a two-notch
uplift from the bank's adjusted BCA. The bank's ratings do
not benefit from uplift from government support.
Banca March's BCA of baa2 reflects the bank's sound credit profile,
especially in terms of capital adequacy which, with a TCE over risk-weighted
assets (RWA) ratio of 21.3% at the end of 2016, ranks
among the strongest in the Spanish banking sector. The BCA also
reflects the bank´s strong asset quality, with an exposure
to problematic assets (i.e. problem loans and repossessed
real estate assets) materially below the system average, and the
bank's sound funding profile, supported by a large and stable
deposit base that covers around 90% of the bank´s funding
needs. As factors constraining the BCA, Moody´s notes
the bank's modest recurrent profitability as well as its exposure
to equity risk through its investment vehicle, Corporacion Financiera
Alba (unrated).
The outlook on Banca March's long-term deposit ratings is stable.
Moody's notes that the current baa2 BCA and A3 deposit ratings are
placed at and two notches above the Spanish sovereign rating respectively,
and are constrained at that levels under Moody's methodology.
Therefore, any upward pressure on Banca March's BCA and deposit
ratings would require an upgrade of Spanish sovereign rating.
-- CAJA RURAL DE NAVARRA
Moody's has today affirmed Caja Rural de Navarra's Baa2/Prime-2
deposit ratings. The outlook on the long-term deposit ratings
is stable.
Caja Rural de Navarra's long-term deposit ratings of Baa2 reflect:
(1) the affirmation of the bank's baa2 BCA and adjusted BCA; and
(2) Moody's Advanced LGF analysis that provides no uplift from the
bank's adjusted BCA. There is no government support uplift for
these ratings, given Moody's assumption that the probability of
such support is low.
Caja Rural de Navarra's BCA of baa2 reflects the bank's sound financial
fundamentals, namely: (1) its stronger asset-quality
performance compared with that of the wider Spanish banking system;
(2) its sound capitalization levels; and (3) its stable retail deposit
base and low reliance on wholesale funding. The bank's BCA also
reflects Caja Rural de Navarra's modest, albeit stable, profitability
levels.
Caja Rural de Navarra's BCA is constrained at the level of the Spanish
sovereign rating. Under Moody's methodology, a bank's
BCA will not typically exceed the sovereign rating absent any factor that
reduces the dependency between the creditworthiness of that bank and the
sovereign. Therefore, any upward pressure on Caja Rural de
Navarra's ratings is dependent on an upgrade of the government of
Spain's ratings, thereby lifting the current constraint on the bank's
BCA. The outlook on Caja Rural de Navarra's long-term
deposit ratings is also aligned with that of the Spanish sovereign.
FACTORS THAT COULD LEAD TO AN UPGRADE
Banks' standalone BCAs could be upgraded as a consequence of a sustained
recovery of recurrent profitability levels, while maintaining current
improving trends of asset risk indicators, with an ongoing reduction
in the stock of problematic assets. The banks' BCAs could
also be upgraded on the back of stronger TCE levels.
As the banks' debt and deposit ratings are linked to the standalone
BCA, any change to the BCA would likely also affect these ratings.
The bank's deposit and senior debt ratings could also experience
upward pressure from movements in the loss-given-failure
faced by these securities.
FACTORS THAT COULD LEAD TO A DOWNGRADE
Downward pressure on the banks' BCAs could develop as a result of:
(1) The reversal in current asset risk trends with an increase in the
stock of NPLs and/or other problematic exposures; (2) a weakening
of banks' internal capital-generation and risk-absorption
capacity as a result of subdued profitability levels; and/or (3)
a deterioration in the banks' liquidity position.
As the banks' debt and deposit ratings are linked to the standalone
BCA, any change to the BCA would likely also affect these ratings.
The bank's deposit and senior debt ratings could also experience
downward pressure from movements in the loss-given-failure
faced by these securities.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_195549
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Lead Analyst
• Releasing Office
• Person Approving the Credit Rating
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Items color coded in purple in this from to list relate to unsolicited
ratings for a rated entity which is non-participating.
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.
Maria Cabanyes
Senior Vice President
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
Client Service: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
