Moody's reduces Belgium's macro profile to Very Strong- and affirms ING Belgium and Axa Bank Europe's ratings
Paris, March 29, 2017 -- Moody's Investors Service, ("Moody's") has
upgraded Belfius Bank SA/NV (Belfius)'s long-term senior
unsecured debt and deposit ratings, as well as Belfius Financing
Company S.A's backed senior unsecured rating, to A2
from A3. The outlook on these ratings was changed to positive from
stable. The rating agency also upgraded both entities' short-term
ratings to Prime-1, from Prime-2. Moody's
upgraded Belfius's baseline credit assessment (BCA) to baa2,
from baa3, reflecting the bank's improving financial profile.
The agency upgraded Belfius' subordinated and junior subordinated
debt ratings to Baa3 and Ba1(hyb), from Ba1 and Ba2(hyb) respectively.
The bank's long-term counterparty risk (CR) assessment was
also upgraded to A1(cr), and its short-term CR assessment
affirmed at Prime-1(cr).
Moody's also revised downwards its macro profile for Belgium to
Very Strong-, from Very Strong, to reflect a slightly
weaker operating environment following the agency's reduced GDP
growth forecast in Belgium. This change affects the weighted macro
profiles of ING Belgium SA/NV and Axa Bank Europe NV/SA, both of
which move to Very Strong- from Very Strong. However,
in Moody's view this does not materially impact the intrinsic credit
strength of either bank, leading the agency to affirm ING Belgium
SA/NV's and Axa Bank Europe NV/SA's BCAs at baa1 and baa3,
respectively, and their deposit ratings at A1 and A2, respectively.
The outlook on the long-term ratings of these entities remains
stable.
A list of affected ratings can be found at the end of this press release.
RATINGS RATIONALE
The upgrade of Belfius' BCA to baa2 primarily reflects the bank's
restored franchise and increasing track record in improving its overall
financial profile, bringing it back in line with its main Belgian
peers. In particular, Belfius reduced its legacy assets (bonds,
credit guarantees and funding to Dexia) to EUR 10.5 billion,
in December 2016, from EUR 73.9 billion in 2011, and
discontinued the "Side" business line, where those legacy
exposures were booked for efficiency purposes, as planned.
Furthermore, despite the low interest rate environment, which
dented its net interest margin in 2016, Belfius's profitability
has increased thanks to the low credit cost of its large mortgage and
public sector loan books, and steady loan growth. The bank's
capitalization has also further improved, to reach a Basel III fully
loaded Common Equity Tier 1 (CET1) ratio of 16.1% in December
2016. Belfius's regulatory capital is, however,
dependent on model assumptions on its low-default public sector
portfolio and regulatory options on the non-deductibility of equity
participation in insurance companies (Danish compromise).
Belfius' A2 deposit and senior unsecured debt ratings also reflect
very low loss-given-failure, which translates into
a two-notch uplift from the bank's BCA, under Moody's
advanced Loss Given Failure (LGF) analysis. In addition,
deposits and senior unsecured debt benefit from a moderate probability
of government support, as the agency considers Belfius to be a systemic
bank in Belgium; this results in an additional one-notch uplift
from the bank's BCA.
The positive outlook on Belfius's senior unsecured debt rating reflects
Moody's expectations that Belfius' capital and profitability
will continue to improve over the next 12-18 months owing to a
low cost of risk, growing commission income stemming from insurance
and off-balance sheet savings, and the continuation of its
de-risking policy.
WHAT COULD CHANGE THE RATING UP/DOWN
Belfius' long-term and short-term ratings could be
upgraded as a result of an upgrade of its BCA. Its BCA would likely
be upgraded if risk concentrations in the bank's loan and investment portfolios
were to be further reduced, its profit growth were to accelerate,
and/or its capital position continue to strengthen above current expectations.
Belfius' deposit and senior unsecured ratings could also be upgraded
as a result of material issuance of additional subordinated debt,
which would substantially decrease loss-given-failure.
The outlook on Belfius' long-term ratings being positive,
the likelihood of a downgrade is low. However, Belfius's
BCA could nevertheless be downgraded as a result of unexpected losses
arising from its investment and/or loan book. A downgrade of its
BCA would likely result in a downgrade of all Belfius's ratings.
LIST OF AFFECTED RATINGS
Issuer: Belfius Bank SA/NV
..Affirmations:
....ST Counterparty Risk Assessment,
affirmed P-1(cr)
..Upgrades:
....LT Counterparty Risk Assessment,
upgraded to A1(cr) from A2(cr)
....LT Bank Deposits, upgraded to A2
Positive from A3 Stable
....ST Bank Deposits, upgraded to P-1
from P-2
....LT Deposit Note/CD Program, upgraded
to (P)A2 from (P)A3
....ST Deposit Note/CD Program, upgraded
to (P)P-1 from (P)P-2
....Senior Sub LT Deposit Program, upgraded
to (P)Baa3 from (P)Ba1
....Senior Unsecured Regular Bond/Debenture,
upgraded to A2 Positive from A3 Stable
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)A2 from (P)A3
....Subordinate Regular Bond/Debenture,
upgraded to Baa3 from Ba1
....Subordinate Medium-Term Note Program,
upgraded to (P)Baa3 from (P)Ba1
....Junior Subordinated Regular Bond/Debenture,
upgraded to Ba1(hyb) from Ba2(hyb)
....Adjusted Baseline Credit Assessment,
upgraded to baa2 from baa3
....Baseline Credit Assessment, upgraded
to baa2 from baa3
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Belfius Financing Company S.A
..Upgrades:
....Backed Senior Unsecured Regular Bond/Debenture,
upgraded to A2 Positive from A3 Stable
....Backed Senior Unsecured Medium-Term
Note Program, upgraded to (P)A2 from (P)A3
....Backed Subordinate Regular Bond/Debenture,
upgraded to Baa3 from Ba1
....Backed Subordinate Medium-Term
Note Program, upgraded to (P)Baa3 from (P)Ba1
....Backed Junior Subordinated Regular Bond/Debenture,
upgraded to Ba1(hyb) from Ba2(hyb)
....Backed Commercial Paper, upgraded
to P-1 from P-2
..Outlook Action:
....Outlook changed to Positive from Stable
Issuer: Axa Bank Europe NV/SA
..Affirmations:
....LT Counterparty Risk Assessment,
affirmed Aa2(cr)
....ST Counterparty Risk Assessment,
affirmed P-1(cr)
....LT Bank Deposits, affirmed A2 Stable
....ST Bank Deposits, affirmed P-1
....Adjusted Baseline Credit Assessment,
affirmed a2
....Baseline Credit Assessment, affirmed
baa3
..Outlook Action:
....Outlook remains Stable
Issuer: ING Belgium SA/NV
..Affirmations:
....LT Counterparty Risk Assessment,
affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
affirmed P-1(cr)
....LT Bank Deposits, affirmed A1 Stable
....ST Bank Deposits, affirmed P-1
....Adjusted Baseline Credit Assessment,
affirmed baa1
....Baseline Credit Assessment, affirmed
baa1
..Outlook Action:
....Outlook remains Stable
Issuer: ING Belgium International Finance S.A.
..Affirmation:
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)A2
..Outlook Action:
....Outlook remains Stable
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
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 relevant office for each credit rating is identified in "Debt/deal
box" on the Ratings tab in the Debt/Deal List section of each issuer/entity
page of the Website.
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.
Laurent Le Mouel
Vice President - Senior Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Nicholas Hill
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454