Madrid, April 27, 2018 -- Moody's Investors Service has today upgraded Banco Popular Espanol,
S.A.'s (Banco Popular) deposit ratings to A2/Prime-1
from Baa2/Prime-2 and its senior unsecured programme ratings to
(P)A2/(P)Prime-1 from (P)Baa2/(P)Prime-2. At the
same time, the rating agency has also: (1) upgraded the bank's
adjusted baseline credit assessment (BCA) to baa1 from ba3; and (2)
upgraded the long-term Counterparty Risk Assessment (CR Assessment)
to A3(cr) from Baa2(cr). Banco Popular's short-term CRA
has been affirmed at Prime-2(cr). The outlook on the bank's
long-term deposit ratings has been changed to stable from positive.
Banco Popular's BCA of caa1 was not affected by today's rating
action.
The rating action follows the announcement made by Banco Santander S.A.
(Spain) (Banco Santander; A2 stable deposit ratings/(P)A2 senior
unsecured programme ratings, baa1 BCA) on 24 April 2018, that
its board of directors had reached an agreement to merge by absorption
its domestic subsidiary Banco Popular. Banco Santander is direct
holder of 100% of the capital of Banco Popular.
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
The upgrade of Banco Popular's long-term deposit ratings to A2
from Baa2 and its supported entities' senior unsecured debt ratings to
A2 from Baa2 reflect: (1) the upgrade of its adjusted BCA to baa1
from ba3; (2) the two-notches of uplift from Moody's Advanced
LGF analysis of Banco Santander; and (3) Moody's assessment of moderate
probability of government support for Banco Popular in line with Moody's
assumption for the whole Banco Santander group, which now results
in no uplift for both the deposit and the senior debt ratings from a one-notch
of uplift previously. Similar to Banco Santander, Banco Popular's
long-term deposit and senior unsecured debt ratings are now capped
at A2 by the Spain's sovereign rating of Baa1 with a stable outlook.
Banco Popular's adjusted BCA has been upgraded to baa1 to reflect Moody's
assessment of a higher probability of affiliate support coming from Banco
Santander than initially incorporated. These new support assumptions
now result in nine notches of affiliate support uplift from four notches
previously, whereby the higher uplift reflects Moody's considerations
that the legal integration of Banco Popular into Banco Santander is now
imminent. The higher affiliate support assumptions also reflect
Moody's views that the risk of the merger not being executed is
very limited given the conditions set in the merger document.
Banco Popular's long-term deposit ratings are now aligned with
those of Banco Santander and therefore carry a stable outlook, in
line with the outlook of the parent.
WHAT COULD CHANGE THE RATING UP/DOWN
Upward or downward pressure on Banco Popular's deposit and debt ratings
are primarily dependent on an upgrade or downgrade of the ratings of Banco
Santander.
LIST OF AFFECTED RATINGS
Issuer: Banco Popular Espanol, S.A.
..Upgrades:
....Adjusted Baseline Credit Assessment,
upgraded to baa1 from ba3
....Long-term Counterparty Risk Assessment,
upgraded to A3(cr) from Baa2(cr)
....Long-term Bank Deposits,
upgraded to A2 Stable from Baa2 Positive
....Short-term Bank Deposits,
upgraded to P-1 from P-2
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)A2 from (P)Baa2
....Other Short Term, upgraded to (P)P-1
from (P)P-2
..Affirmation:
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
..Outlook Action:
....Outlook changed to Stable from Positive
Issuer: BPE Finance International Limited
..Upgrades:
....Backed Senior Unsecured Regular Bond/Debenture,
upgraded to A2 Stable from Baa2 Positive
..Outlook Action:
....Outlook changed to Stable from Positive
Issuer: BPE Financiaciones, S.A.
..Upgrades:
....Backed Senior Unsecured Medium-Term
Note Program, upgraded to (P)A2 from (P)Baa2
....Backed Senior Unsecured Regular Bond/Debenture,
upgraded to A2 Stable from Baa2 Positive
..Outlook Action:
....Outlook changed to Stable from Positive
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
April 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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 Vinuela
Asst Vice President - Analyst
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