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Rating Action:

Moody's takes rating actions on subsidiaries of Unicredit SpA in Poland, Slovakia and Kazakhstan

Global Credit Research - 15 May 2012

Actions follow the downgrade of the parent bank's ratings

London, 15 May 2012 -- Moody's Investors Service has today downgraded by one notch the long-term deposit ratings of UniCredit Bank Slovakia a.s. to Baa2, with a stable outlook, from Baa1, and the long-term debt and deposit ratings of ATF Bank (Kazakhstan) to B1, with a stable outlook, from Ba3.

These rating actions primarily reflect the reduced capacity of the parent banking group (UniCredit SpA) to provide capital and funding support, if needed, to its subsidiaries, as indicated by the recent one-notch downgrade on of UniCredit SpA to A3 negative; C-/baa2 negative. For further details see press release http://www.moodys.com/research/Moodys-downgrades-Italian-banks-outlooks-remain-negative--PR_244732 published on 14 May 2012.

At the same time, Moody's confirmed UniCredit's Polish subsidiary Pekao SA's A2 deposit ratings with a negative outlook and standalone bank financial strength rating (BFSR) of C- (mapping to baa1 on the long-term scale) with a stable outlook.

Today's rating actions on these subsidiaries conclude the reviews initiated on 16 November 2011, when the ratings of these subsidiaries were placed on review for downgrade, following a similar rating action on UniCredit SpA.

Full list of affected ratings is provided at the end of the press release. For additional information on bank ratings, please refer to the webpage containing Moody's related announcements http://www.moodys.com/bankratings2012.

RATINGS RATIONALE FOR SLOVAK AND KAZAKH SUBSIDIARIES

The one-notch downgrades of the Slovak and Kazakh subsidiaries of UniCredit were driven primarily by the weakening capacity and, to a lesser extent, willingness of the parent to provide timely capital and funding support to its subsidiaries, if needed.

--- WEAKENING CAPACITY OF THE PARENT BANK TO PROVIDE SUPPORT

Moody's says that the lowering of UniCredit's standalone credit assessment to baa2, as announced yesterday, reflects (i) weakening profitability and asset quality; (ii) restricted access to market funding; and (iii) the increasingly difficult operating environment that the group faces, particularly in the Italian market, where conditions have deteriorated significantly since H1 2011. Under Moody's Joint Default Analysis methodology, the long-term ratings of the Slovak and Kazakh subsidiaries incorporate uplift from parental support assumptions; the one-notch lowering of UniCredit's standalone credit strength results in a corresponding rating downgrade for the subsidiaries.

--- SHIFTING STRATEGIC PRIORITIES ALSO AFFECT WILLINGESS TO PROVIDE SUPPORT

The rating action on the Kazakh and Slovak subsidiaries also takes into account, albeit to a lesser extent, Moody's view that UniCredit SpA's willingness to extend financial support to some peripheral international subsidiaries has weakened.

Many Western European banks, including UniCredit, are facing difficult choices regarding the allocation of their scarce capital and funding resources. This has implications for those international subsidiaries whose medium-term profitability potential has been impaired by the ongoing financial crisis and/or are located in the countries that have reduced strategic significance for UniCredit group. Accordingly, as the parent group aims to refocus on its core operations, Moody's considers that UniCredit's willingness to provide capital and funding resources to these subsidiaries has weakened compared to the pre-crisis period.

ATF BANK -- WHAT COULD MOVE THE RATINGS UP/DOWN

In the short-term, ATF Bank's ratings are unlikely to be upgraded as it has been a consistently loss-making for the past few years, requiring a parental guarantee for over 40% of its loans. In the medium-term, a sustainable improvement in the bank's earnings and reductions in loan-loss provisions, leading to increases in net income and capital, could exert upward pressure on the ratings. Conversely, a further material weakening of ATF Bank's earnings generation, further eroding its capital and franchise, could lead to a downgrade of its ratings. In addition, further significant downward pressure on UniCredit's ratings could impact ATF's ratings.

UNICREDIT BANK SLOVAKIA -- WHAT COULD CHANGE THE RATINGS UP/DOWN

Currently, UniCredit Bank Slovakia's ratings reflect its high borrower concentration, including exposure to commercial real-estate and project finance, and its weakening asset quality, counterbalanced by its solid franchise in the Slovak market relative to its peers and its adequate capitalisation levels.

In the medium-term a sustained reduction in borrower concentration and improvement in asset quality could exert upward pressure on the bank's ratings. Conversely, further deterioration in the bank's financial fundamentals, particularly related to asset quality, liquidity and capitalisation, could exert downward pressure on the ratings. In addition, further significant downward pressure on UniCredit's ratings could impact UniCredit Bank Slovakia's ratings.

--- CONFIRMATION OF PEKAO'S RATINGS REFLECTS STANDALONE RESILIENCE

Pekao's ratings were originally placed on review over concerns regarding how the challenges facing the parent group could negatively impact the subsidiary's credit profile. The confirmation of Pekao's ratings reflects Moody's view of the Polish subsidiary's relatively independent franchise from that of the parent, no reliance on parental funding, strong standalone financial fundamentals, and stringent regulatory controls on dividend distributions. These considerations underpin Moody's view that the bank's credit-profile is partly insulated from the pressures experienced by its parent and results in Pekao's standalone credit strength maintained at baa1, one notch higher than the parent's standalone strength of baa2.

The confirmation of Pekao's long-term deposit rating of A2 results from the maintenance of a two-notch uplift from Moody's assessment of systemic support assumptions, given Pekao's systemic importance as the second-largest franchise in Poland.

--- FACTORS THAT INSULATE PEKAO (POLAND) FROM THE PARENT'S CREDIT RISKS

The following factors underpin Moody's view that the Polish subsidiary is currently insulated from the credit pressures affecting its Italian parent:

(i) Although Pekao's is majority owned (59%) by UniCredit, the consistency and transparency of Pekao's strategy is supported by active minority shareholders and quarterly public disclosures, due to its presence on the Warsaw stock exchange. Brand association with UniCredit is relatively low and the quality of Pekao's customer base is not directly correlated with that of the group. This supports Moody's view of the relative independence of Pekao's franchise from that of the parent group.

(ii) Pekao has remained one of the stronger performing banks amongst its Polish peer group during the crisis, with a strong capital base supporting its franchise and growth. Moody's does not see a material risk of Pekao's capital base being depleted by dividend transfers to the parent. Moreover, protection of the strong capital base is supported by the guidelines set by the Polish regulatory authority (KNF) in 2011 to limit the dividend distributions that Polish banks, including foreign subsidiaries, can make to their shareholders.

(iii) Pekao remains a fully self-funded institution, with an independent treasury function and limited non-material exposures to the parent group.

PEKAO -- WHAT COULD MOVE THE RATINGS UP/DOWN

Given the current negative outlook on Pekao's deposit ratings, which is aligned with the negative outlook on UniCredit, an upgrade is unlikely in the near term.

Today's rating actions on Pekao reflect Moody's view of the independence of the Polish subsidiary's franchise. Nevertheless, the rating agency also recognises that further deterioration in the parent's financial fundamentals and downward pressure on the parent ratings could lead to group-wide spill-over effects that could ultimately weaken Pekao's franchise strength.

Therefore, notwithstanding the relative independence of the Polish subsidiary at this stage, further significant downward pressure on UniCredit's ratings could impact Pekao's standalone and long-term ratings.

FULL LIST OF RATING ACTIONS

The following ratings were affected today:

..Issuer: ATF Bank

Long-term local- and foreign-currency deposit ratings to B1 from Ba3, with stable outlook

Foreign currency senior unsecured debt rating to B1 from Ba3, with stable outlook

Junior subordinate debt rating to B3(hyb) from B2(hyb), with stable outlook

ATF Capital BV senior unsecured global bonds to B1 from Ba3, with stable outlook

..Issuer: UniCredit Bank Slovakia

Long-term local- and foreign-currency deposit ratings to Baa2 from Baa1, with stable outlook

Short-term local- and foreign-currency deposit ratings of Prime-2 confirmed

..Issuer: Bank Polska Kasa Opieki S.A.

Long-term local- and foreign-currency deposit ratings of A2 confirmed, with negative outlook

Bank financial strength rating of C- confirmed, with stable outlook (mapping to baa1)

Short-term local- and foreign-currency deposit ratings of Prime-1 confirmed

The following ratings were unaffected:

..Issuer: ATF Bank

Bank financial strength rating of E+, with stable outlook (mapping to b3)

Short-term local- and foreign-currency deposit ratings of Not Prime

..Issuer: UniCredit Bank Slovakia

Bank financial strength rating of D+, with stable outlook (mapping to ba1)

The methodologies used in these ratings was 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. 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 deposit ratings of rated entity Bank Polska Kasa Opieki S.A. were initiated by Moody's and were not requested by these rated entities.

Rated entity Bank Polska Kasa Opieki S.A. or its agent(s) participated in the rating process. This rated entity or its agent(s) provided Moody's access to the books, records and other relevant internal documents of the rated entity.

The ratings have been disclosed to the rated entities or their designated agents and issued with no amendment resulting from that disclosure

Information sources used to prepare the rating(s) for ATF Bank and Bank Polska Kasa Opieki S.A. are the following: parties involved in the ratings, and public information.

Information sources used to prepare the rating(s) for Unicredit Bank Slovakia and are the following : parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

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 considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

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.

The below contact information is provided for information purposes only. Please see the issuer page on www.moodys.com for Moody's regulatory disclosure of the name of the lead analyst and the office that has issued the credit rating.

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.

Irakli Pipia
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

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 takes rating actions on subsidiaries of Unicredit SpA in Poland, Slovakia and Kazakhstan
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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