Rating actions follow banks' recent recapitalization
NOTE: On February 24, 2016,the press release was corrected as follows: In the list of rating actions for issuer ERB Hellas (Cayman Islands) Limited, removed reference to “stable” for previous C rating of BACKED Senior Unsecured debt. Revised release follows.
Limassol, February 19, 2016 -- Moody's Investors Service (Moody's) has today upgraded to Ca from
C the long-term senior debt ratings of Alpha Bank AE, Eurobank
Ergasias S.A., National Bank of Greece S.A.,
and Piraeus Bank S.A. At the same time, Moody's affirmed
the Caa3 long-term deposit ratings of the aforementioned banks
(and Attica Bank S.A.), and upgraded all five banks'
baseline credit assessment (BCA) to caa3 from ca. The long-term
debt and deposit ratings carry stable outlooks.
"The upgrade of the Greek banks' BCAs and debt ratings primarily
reflects the successful completion of the recapitalisation process by
all rated banks, which has strengthened their capital metrics,
as well as our expectation of modest and gradual improvements in funding,"
says Nondas Nicolaides, a Senior Credit Officer at Moody's.
"Our ratings balance these improvements in the banks' credit
profiles against the still significant downside risks due to the fragile
operating environment in Greece."
The affirmation of the banks' Caa3 deposit ratings primarily reflects
the on-going deposit controls in Greece, and the losses for
depositors that do not have instant access to the full amount of their
deposits. Although Moody's expects only a gradual relaxation of
such capital controls over the next 12-18 months, the change
in the deposit rating outlook to stable from negative reflects the rating
agency's opinion that the risk of a bail-in for uninsured depositors
has somewhat abated following the recent bank recapitalisation.
Moody's affirmed the C ratings assigned to the four systemic banks'
subordinated Tier 2 debt and non-cumulative Tier 1 preferred stock.
These affirmations were driven by these instruments' structural
subordination to senior debt, and the higher likelihood that they
could sustain significant losses before senior debt holders are affected
in a potential bank resolution scenario.
A full list of affected ratings is provided towards the end of this press
release.
RATINGS RATIONALE
--- BCA UPGRADE TO caa3 FROM ca MAINLY DRIVEN BY
ENHANCED CAPITAL BASE
The upgrade of all five Greek banks' BCAs to caa3 from ca reflects the
recent recapitalisations, and Moody's expectations of modest
funding improvements that will support profitability, balanced against
downside risks due to the fragile operating environment.
Greek banks raised approximately EUR14.4 billion of new capital
in December 2015, enhancing their loss-absorption capacity
and capital metrics. The share capital increases were triggered
by the comprehensive assessments conducted by the Single Supervisory Mechanism
for the four systemic banks, and the Bank of Greece for the much
smaller Attica Bank. Moody's estimates that the pro-forma
common equity Tier 1 (CET1) ratio for the system improved to around 19%
post-recapitalisation, from around 11% pre-recapitalisation
as of September 2015.
Moody's notes that although banks' reported CET1 ratios have increased
considerably, deferred tax assets (DTAs) eligible for deferred tax
credits (DTCs) continue to form a substantial part of banks' capital
base. While lower than the 70% pre-recapitalisation
average as of September 2015, the share of eligible DTAs in CET1
capital remains high at around 45% on average for the system post-recapitalisation.
The rating agency considers this capital to be of inferior quality in
view of the Greek sovereign's (Caa3 stable) weak credit standing
and its limited ability to meet around EUR16.8 billion of such
outstanding DTAs in the banking system.
The BCA upgrade also takes into account nascent improvements in the banks'
funding and liquidity profiles, as part of the capital proceeds
were used to repay their high cost emergency liquidity assistance (ELA)
to the Bank of Greece. ELA stood at around EUR69 billion for the
system in December 2015, down from EUR87 billion in June 2015.
Moody's expects further reduction in the banks' dependence
on ELA, provided the first review of the country's support
programme by its official lenders (EC/ECB/ESM/IMF) is concluded positively
in a timely manner. This development would likely trigger the reinstatement
of the European Central Bank (ECB) waiver, allowing Greek government
securities to be used by banks as collateral for ECB funding purposes.
This would enable banks to switch a portion of their funding from the
more costly ELA to the ECB repo window, and also somewhat restore
confidence in the banking system resulting in gradual deposit inflows.
Concurrently, Moody's expects that banks' reducing funding
costs will support pre-provision income in 2016-17,
and bottom-lines will be largely driven by the level of provisioning
requirements. Following significant provisions that Greek banks
had to take in 2015 -- triggered by the ECB's asset
quality review (AQR) -- loan loss provisions are likely
to be significantly lower in 2016-17. Moody's estimates
that system nonperforming loans (NPLs, loans that are 90 days past
due) comprised on average around 36.5% of gross loans as
of September 2015, while the non-performing exposure (NPE)
ratio (as per the ECB's definition including performing restructured/forborne
and impaired loans for at least 12 months) stood at 49.3%.
The rating agency considers that the NPL ratio is likely to peak towards
the end of 2016 or early 2017, provided there is political stability
and economic conditions that do not deviate materially from the European
Commission's current GDP growth forecast of around -0.7%
in 2016 and +2.7% in 2017.
Moody's considers that the BCA of caa3 for all five banks appropriately
balances these recent improvements in their standalone credit profiles
as well as the considerable downside risks stemming from the still fragile
operating environment in Greece. Moody's considers that over
the next 12-18 months, banks' performance will highly
depend on political stability in the country and the implementation of
the support programme's conditionality, which includes new
legislation to overhaul the NPL resolution framework.
--- DEPOSIT RATINGS AFFIRMED AT Caa3, OUTLOOK
CHANGED TO STABLE FROM NEGATIVE
The change in the deposit ratings outlook to stable from negative reflects
the recent improvements in the banks' financial fundamentals,
as well as the reduced risk for potential sizeable losses for depositors
following the recent recapitalisation. The affirmation of the banks'
Caa3 deposit ratings primarily reflects the on-going capital controls
in place as well as the implied losses faced by depositors that do not
have instant access to the full amount of their funds. Although
Greek depositors were excluded from bail-in during the recent recapitalisation,
Moody's considers that the relative risks are still elevated, especially
within the context of the Bank Recovery and Resolution Directive (BRRD)
transposition law that was passed in Greece in 2015, envisaging
the inclusion of depositors in a potential bank bail-in from January
1, 2016. All banks' Caa3 deposit ratings are positioned at
the same level as the local-currency deposit ceiling for Greece.
--- SENIOR DEBT RATINGS UPGRADED TO Ca from C,
JUNIOR INSTRUMENTS AFFIRMED AT C
The upgrade of the four systemic banks' senior debt ratings to Ca from
C reflects Moody's view that the risk of potential expected losses
for senior debt holders has reduced, but remains high. The
rating agency notes the crystallisation of losses for senior debt holders
through the banks' liability management exercises (LMEs).
These LMEs included an offer to investors to voluntarily exchange their
senior debt with new shares of the bank worth 100% of the debt's
par value. Although any investors that sold their stock holdings
in the first few days of trading after the actual exchange took place
were able to recoup a substantial portion of their senior debt holdings'
par value, investors that retained such new shares to date are facing
significant losses. Following the banks' recapitalisations
and improved credit profiles, with the potential for more favourable
prospects going forward, the rating agency considers that senior
debt investors are less likely to sustain considerable losses.
However, the Ca senior debt rating is constrained by the still sizeable
downside risks faced by investors going forward. Moody's
considers that the level of senior debt outstanding in the system is minimal
at around EUR180 million. This is because there were only a few
holdout investors that did not participate in the debt-equity exchange
at Alpha Bank and Eurobank, both of which did not resort to any
state aid from the Hellenic Financial Stability Fund (HFSF) in the recent
recapitalisation. As a result of the minimal level of structural
subordination offered to senior depositors in case of a bank bail-in,
such senior debt holders could be faced with substantial losses.
The senior debt ratings outlook is stable.
At the same time, Moody's affirmed the C ratings assigned
to the four systemic banks' subordinated Tier 2 debt and non-cumulative
Tier 1 preferred stock. These affirmations were driven by these
instruments' structural subordination to senior debt, and
the higher likelihood that they could sustain significant losses before
senior debt holders are affected in a potential bank resolution scenario.
INDIVIDUAL BANKS
--- ALPHA BANK
Alpha Bank's pro-forma CET1 ratio increased to 17.4%
from 12.5% reported as of September 2015 following its recent
recapitalisation. Injected capital included around EUR2.6
billion solely from private sources, in addition to around EUR180
million of other capital measures approved by the ECB. Moody's
estimates a prudent tangible CET1 ratio of around 10.9%,
excluding any eligible DTAs (estimate for all banks does not take into
account any risk-weighted-assets impact), positioning
the bank at the stronger end among its local systemic peers, having
more loss-absorbing capital.
The bank reported losses of around EUR839 million for the first nine-months
of 2015, while its NPL and NPE ratio stood at around 36.5%
and 50%, respectively, as of September 2015.
NPL and NPE provisioning coverage stood at around 67% and 49%,
respectively. Moody's believes that the relatively high NPL
provisioning coverage provides the bank with more flexibility to actively
manage its NPL portfolio. The bank's ELA as of September
2015 stood at EUR22.2 billion, comprising 31.8%
of its total assets, although Moody's expects this type of
funding to have reduced following the liquidity boost from the recent
share capital increase.
--- ATTICA BANK
Attica Bank, the smallest among all rated Greek banks with a market
share of only around 2%, raised around EUR681 million of
new capital, which is EUR67 million short of the adverse scenario
capital needs indicated by the Bank of Greece. Moody's understands
that the bank is currently in negotiations with potential investors aiming
to cover this shortfall within Q1 2016. The bank's pro-forma
CET1 ratio following the capital increase of EUR681 million is amongst
the highest in the system at 22.6% as of September 2015,
although the rating agency expects this to have reduced by more than 200
basis points by the end of December 2015 due to additional losses to be
reported in Q4 2015.
The bank reported losses of around EUR273 million in the first nine-months
in 2015, as its NPE ratio increased significantly to 55.8%
in September 2015 (NPL ratio of 54.2%) from 44.8%
in December 2014. Following the AQR by the Bank of Greece,
the bank had to almost double its stock of provisions during 2015,
increasing its NPE provisioning coverage to 50.9% in September
2015 from a low 32.6% in December 2014. The bank's
ELA dependence was around EUR815 million as of September 2015, comprising
around 22.6% of its total assets.
--- EUROBANK ERGASIAS
Eurobank was able to raise around EUR2 billion from private investors,
having the lowest capital needs among its domestic peers based on the
ECB's comprehensive assessment. This new capital increased
its pro-forma CET1 ratio to 17.5% from 12.1%
reported as of September 2015. Nonetheless, Moody's
considers the bank to have a lower quality of capital than its peers,
in view of its eligible DTAs (EUR4.1 billion) and the state preference
shares of around EUR950 million that the bank retains on its balance sheet
and will need to repay at some stage. The rating agency estimates
a forward-looking tangible CET1 ratio for the bank, excluding
any eligible DTAs and the state preference shares, of around 4.7%.
The bank's losses in the first nine months of 2015 amounted to around
EUR1 billion, while its NPL and NPE ratio stood at around 35%
and 43.1%, respectively, as of September 2015.
Eurobank's NPL and NPE provisioning coverage stood at around 65%
and 53%, respectively. The bank's ELA as of
September 2015 stood at EUR22.2 billion, comprising around
30% of its total assets, although Moody's notes that
the bank was able to recently regain access to the inter-bank repo
market with the use of its European Financial Stability Facility (EFSF)
bonds (Aa1 stable). In addition, the bank would be in a position
to shift around EUR5 billion of funding to the ECB from ELA upon the reinstatement
of the waiver by the ECB, supporting its pre-provision income
that stood at EUR658 million during the first nine-months of 2015.
--- NATIONAL BANK OF GREECE
In 2015, National Bank of Greece's capital metrics were enhanced
through its EUR1.8 billion capital raising from private sources,
as well as through EUR2.7 billion of new capital received from
the HFSF, of which EUR2 billion was in the form of contingent convertible
instruments (CoCos) recognised as CET1 capital. In addition,
the bank concluded the sale of its Turkish subsidiary Finansbank AS (deposits
Ba2 on review for upgrade, BCA b1 on review for upgrade) to Qatar
National Bank (deposits Aa3 stable, BCA baa1) for a consideration
of EUR2.75 billion, which will further boost its capital
position provided all regulatory approvals are granted. The bank's
pro-forma CET1 ratio, incorporating the sale of Finansbank
that will significantly reduce the group's risk-weighted
assets, will increase to 24.6% from the reported 9.6%
in September 2015. The bank plans to use part of its sale proceeds
to repay its EUR2 billion CoCos to the HFSF, reducing its CET1 ratio
to 19.6% from 24.6%. Excluding any
eligible DTAs (EUR4.9 billion) and CoCos, Moody's estimates
a tangible CET1 ratio for the bank of around 7.5%.
The bank's NPL and NPE ratios in Greece stood at 33.8%
and 47%, respectively, as of September 2015,
while the NPL and NPE provisioning coverage was 73% and 52%,
among the highest within its local peer group. The rating agency
believes that recoveries from the NPL portfolio could enhance the bank's
relatively weak pre-provision income in Greece of around EUR337
million in the first nine-months of 2015, combined with further
reduction in its operating expenses. In view of the bank's
strong savings franchise in Greece, its ELA balance as of September
2015 stood at a more modest EUR15.6 billion, comprising 18.6%
of its total assets (excluding its operations in Turkey).
--- PIRAEUS BANK
Piraeus Bank's pro-forma CET1 ratio increased to 19.6%
from 11.2%, reported as of September 2015 following
its capital increase. The injection included around EUR1.9
billion from private investors in addition to EUR2.7 billion received
from the HFSF (EUR2 billion in the form of CoCos) and other capital measures
of around EUR271 million approved by the ECB. Moody's estimates
the bank's tangible CET1 ratio excluding its eligible DTAs (EUR4.1
billion) and CoCos at around 8.6%.
Moody's considers Piraeus Bank's asset quality position to be among
the weakest in the system due to its numerous take-overs of smaller
problematic banks in the last few years, which resulted in an NPL
and NPE ratio of around 40.5% and 51.8%,
respectively, as of September 2015. In addition, the
bank's NPL and NPE provisioning coverage is also the lowest among
its local peers at 61% and 44%, respectively.
However, the rating agency expects the bank's asset quality
to gradually improve in view of its focus and active management of its
NPLs and the likely contraction of its international book due to its commitment
to scale-down its operations outside Greece. The bank reported
a net loss of around EUR635 million during the first nine-months
of 2015, although Moody's positively views the bank's
ability to increase its pre-provision income excluding any one-off
revenues/costs.
WHAT COULD MOVE THE RATINGS UP/DOWN
The stable outlook indicates that downside risks for substantial losses
to creditors have abated somewhat following the recent bank recapitalisation.
Over time, upward deposit and senior debt rating pressure could
arise following a stabilisation of the country's macro-economic
environment, combined with an improvement in banks' asset quality,
profitability and funding.
Greek banks' deposit and senior debt ratings could be downgraded in case
there is any political turmoil in the country for an extended period of
time that substantially affects domestic consumption and economic activity,
which have gradually been recovering from a very low base. In addition,
the deposit ratings could be downgraded if the rating agency considers
that the risk of a potential exit from the euro area, and redenomination,
increases materially.
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Ratings Methodologies page on www.moodys.com
for a copy of this methodology.
THE SPECIFIC RATING ACTIONS IMPLEMENTED TODAY ARE AS FOLLOWS:
Issuer: Alpha Bank AE
- Baseline Credit Assessment, Upgraded to caa3 from ca
- Adjusted Baseline Credit Assessment, Upgraded to caa3 from
ca
- Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- LT Bank Deposits, Affirmed Caa3 Stable
- ST Bank Deposits, Affirmed NP
- BACKED (government guaranteed) Senior Unsecured MTN, Affirmed
(P)Caa3
- Subordinate MTN, Affirmed (P)C
- Other Short Term, Affirmed (P)NP
- Counterparty Risk Assessment, Affirmed Caa3(cr)
- Counterparty Risk Assessment, Affirmed NP(cr)
- Outlook, Changed To Stable From Negative
Issuer: Alpha Credit Group plc
- BACKED Senior Unsecured, Upgraded to Ca Stable from C (Assumed
by Alpha Bank AE)
- BACKED Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- BACKED Subordinate, Affirmed C (Assumed by Alpha Bank AE)
- BACKED Subordinate MTN, Affirmed (P)C
- BACKED Other Short Term, Affirmed (P)NP
- BACKED Commercial Paper, Affirmed NP
Issuer: Alpha Group Jersey Limited
- BACKED Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- BACKED Subordinate MTN, Affirmed (P)C
- BACKED Pref. Stock Non-cumulative, Affirmed
C (hyb)
Issuer: Emporiki Group Finance Plc
- BACKED Senior Unsecured, Upgraded to Ca Stable from C (Assumed
by Alpha Bank AE)
---------------
Issuer: Attica Bank S.A.
- Baseline Credit Assessment, Upgraded to caa3 from ca
- Adjusted Baseline Credit Assessment, Upgraded to caa3 from
ca
- LT Bank Deposits, Affirmed Caa3 Stable
- ST Bank Deposits, Affirmed NP
- Counterparty Risk Assessment, Affirmed Caa3(cr)
- Counterparty Risk Assessment, Affirmed NP(cr)
- Outlook, Changed To Stable From Negative
---------------
Issuer: Eurobank Ergasias S.A.
- Baseline Credit Assessment, Upgraded to caa3 from ca
- Adjusted Baseline Credit Assessment, Upgraded to caa3 from
ca
- Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- LT Bank Deposits, Affirmed Caa3 Stable
- ST Bank Deposits, Affirmed NP
- BACKED (government guaranteed) Senior Unsecured MTN, Affirmed
(P)Caa3
- Subordinate MTN, Affirmed (P)C
- BACKED Other Short Term, Affirmed (P)NP
- Other Short Term, Affirmed (P)NP
- Counterparty Risk Assessment, Affirmed NP(cr)
- Counterparty Risk Assessment, Affirmed Caa3(cr)
- Outlook, Changed To Stable From Negative
Issuer: ERB Hellas (Cayman Islands) Limited
- BACKED Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- BACKED Subordinate MTN, Affirmed (P)C
- BACKED Other Short Term, Affirmed (P)NP
- BACKED Senior Unsecured, Withdrawn, previously rated
C
Issuer: ERB Hellas Funding Limited
- BACKED Pref. Stock Non-cumulative, Affirmed
C (hyb)
Issuer: ERB Hellas PLC
- BACKED Senior Unsecured, Upgraded to Ca Stable from C
- BACKED Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- BACKED Subordinate MTN, Affirmed (P)C
- BACKED Other Short Term, Affirmed (P)NP
- BACKED Subordinate Regular Bond/Debenture, Affirmed C
- BACKED Commercial Paper, Affirmed NP
---------------
Issuer: National Bank of Greece S.A.
- Baseline Credit Assessment, Upgraded to caa3 from ca
- Adjusted Baseline Credit Assessment, Upgraded to caa3 from
ca
- LT Bank Deposits Affirmed, Caa3 Stable
- ST Bank Deposits, Affirmed NP
- BACKED (government guaranteed) Senior Unsecured Regular Bond/Debenture,
Affirmed Caa3 Stable
- BACKED (government guaranteed) Senior Unsecured MTN, Affirmed
(P)Caa3
- BACKED Other Short Term, Affirmed (P)NP
- Backed Other Short Term, Affirmed NP
- Counterparty Risk Assessment, Affirmed Caa3(cr)
- Counterparty Risk Assessment, Affirmed NP(cr)
- Pref. Stock Non-cumulative, Withdrawn (hyb),
previously rated C (hyb)
- Outlook, Changed To Stable From Negative
Issuer: NBG Finance plc
- BACKED Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- BACKED Subordinate MTN, Affirmed (P)C
- BACKED Subordinate, Withdrawn , previously rated
C
---------------
Issuer: Piraeus Bank S.A.
- Baseline Credit Assessment, Upgraded to caa3 from ca
- Adjusted Baseline Credit Assessment, Upgraded to caa3 from
ca
- Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- LT Bank Deposits, Affirmed Caa3 Stable
- ST Bank Deposits, Affirmed NP
- Subordinate MTN, Affirmed (P)C
- Counterparty Risk Assessment, Affirmed Caa3(cr)
- Counterparty Risk Assessment, Affirmed NP(cr)
- Outlook, Changed To Stable From Negative
Issuer: Piraeus Group Finance Plc
- BACKED Senior Unsecured MTN, Upgraded to (P)Ca from (P)C
- BACKED Subordinate MTN, Affirmed (P)C
- BACKED Commercial Paper, Affirmed NP
- BACKED Other Short Term, Affirmed (P)NP
- BACKED Subordinate Regular Bond/Debenture, Withdrawn ,
previously rated C
- BACKED Senior Unsecured Regular Bond/Debenture, Withdrawn
, previously rated C
Issuer: Piraeus Group Capital Limited
- BACKED Pref. Stock Non-cumulative, Withdrawn
, previously rated C (hyb)
- Outlook, Changed To Rating Withdrawn From No Outlook
All banks affected by today's rating actions are headquartered in Athens,
Greece:
- National Bank of Greece S.A. reported total consolidated
assets of EUR110.9 billion as of September 2015
- Piraeus Bank S.A. reported total consolidated assets
of EUR85.9 billion as of September 2015
- Eurobank Ergasias S.A. reported total consolidated
assets of EUR73.8 billion as of September 2015
- Alpha Bank AE reported total consolidated assets of EUR69.8
billion as of September 2015
- Attica Bank S.A. reported total consolidated assets
of EUR3.6 billion as of September 2015
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.
Nondas Nicolaides
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Cyprus Ltd.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Sean Marion
Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Cyprus Ltd.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades Greek banks' senior unsecured debt ratings to Ca and affirms deposit ratings at Caa3; outlook stable
