Standalone BCA of a3 is not affected by this rating
London, 13 April 2016 -- Moody's Investors Service has today upgraded Santander UK PLC's
(SAN UK)'s long-term deposit rating to Aa3 from A1 and affirmed
the bank's issuer rating at A1. At the same time, the
rating agency affirmed all the other ratings and the Counterparty Risk
Assessment (CR Assessment) of the bank and its holding company at the
current level. The bank's standalone baseline credit assessment
(BCA) of a3 is unchanged as a result of this action.
For a full list of affected credit ratings please see below.
RATINGS RATIONALE
RATIONALE FOR THE DEPOSIT AND ISSUER RATINGS
The upgrade of SAN UK's long-term deposit rating to Aa3 from
A1 and the affirmation of the issuer rating at A1 are based on the bank's
BCA of a3 and the results of Moody's Advanced Loss Given Failure
(LGF) Analysis.
Taking account of the group's consolidated balance sheet structure
at end-2015 and its near term funding plan, the agency's
LGF Analysis indicates that SAN UK's deposits are likely to face very
low loss-given failure, due to the loss absorption provided
by subordinated debt and, potentially, by senior unsecured
debt should deposits be treated preferentially in a resolution,
as well as the substantial volume of deposits and senior debt themselves.
This results in a Preliminary Rating Assessment (PRA) of a1 for deposits,
two notches above the BCA. This is higher than under the previous
analysis, which was based on end-1H2015 data and resulted
in a PRA of a2, because the group has since issued significant unsecured
debt from its holding company which we believe offers more loss absorption
for deposit liabilities issued by the bank.
SAN UK's senior unsecured debt, issued at the bank level,
is likely to face low loss-given-failure due to the loss
absorption provided by its own volume and the amount of debt subordinated
to it. This results in a PRA of a2, one notch above the BCA.
Moody's assumption of a moderate probability of government support for
SAN UK's senior unsecured debt and deposits results in a one-notch
uplift, hence a long-term deposit rating of Aa3 and a long-term
issuer rating of A1.
RATIONALE FOR THE CR ASSESSMENT
As part of today's action, Moody's also affirmed SAN UK's long-term
CR Assessment at Aa2(cr), four notches above the BCA of a3.
The short-term CR Assessment has been affirmed at P-1(cr).
The CR Assessment is driven by the banks' standalone assessment and by
the considerable amount of subordinated instruments likely to shield counterparty
obligations from losses, accounting for three notches of uplift
relative to the BCA, as well as one notch of government support,
in line with the agency's support assumptions on the bank's
deposits and senior unsecured debt.
RATIONALE FOR THE OUTLOOK
The stable outlook on SAN UK's deposit rating incorporates the improvements
in the bank's solvency profile and more generally in its credit
fundamentals. These elements, together with the improvements
in its franchise and balance sheet risk, should allow for some level
of deterioration in its arrears which may result from loan seasoning and
a greater proportion of SME lending in its loan portfolio.
The positive outlook on SAN UK's issuer rating reflects the group's
near-term funding plans, which will likely involve the issue
of senior unsecured debt at the holding company level, providing
additional protection to creditors of the operating entity.
WHAT COULD CHANGE THE RATINGS UP/DOWN
The BCA could be upgraded if SAN UK: (1) shows a structural reduction
in its reliance on market funding; (2) maintains its strong asset
quality despite growth in its SME lending portfolio; and (3) continues
to improve its solvency profile through satisfactory internal capital
generation. A positive change in SAN UK's BCA would likely affect
all ratings. SAN UK's deposit and issuer ratings could also be
upgraded if the bank or its holding company were to issue significant
amounts of long-term debt and more subordinated debt.
The bank's BCA could be downgraded in the event of: (1) significant
deterioration of SAN UK's asset quality metrics; (2) material weakening
of profitability, which would reduce the bank's loss-absorption
capacity; and (3) deterioration in the bank's funding and liquidity
position, including a further reduction in the quantity or quality
of its liquidity buffer. A downward movement in SAN UK's BCA would
likely result in downgrades of all ratings. SAN UK's ratings
could also be downgraded due to a change in the liability structure,
most likely a reduction in the volume of bail-in-able debt
which would increase their loss-given-failure.
PRINCIPAL METHODOLOGY
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.
LIST OF AFFECCTED RATINGS
Upgrades:
..Issuer: Santander UK PLC
.... LT Bank Deposits (Foreign Currency and
Local Currency), Upgraded to Aa3 Stable from A1 Stable
..Issuer: Abbey National Treasury Services plc
.... LT Bank Deposits (Foreign Currency),
Upgraded to Aa3 Stable from A1 Stable
..Issuer: Alliance & Leicester plc
.... LT Bank Deposits (Foreign Currency and
Local Currency), Upgraded to Aa3 Stable from A1 Stable
Affirmations:
..Issuer: Santander UK PLC
.... LT Issuer Rating, Affirmed A1 Positive
.... ST Bank Deposits (Foreign Currency and
Local Currency), Affirmed P-1
.... Junior Subordinated Regular Bond/Debenture,
Affirmed Baa2 (hyb)
.... Junior Subordinated Shelf, Affirmed
(P)Baa2
.... Subordinate Shelf, Affirmed (P)Baa1
.... Pref. Stock, Affirmed Baa2
(hyb)
.... Pref. Stock Non-cumulative,
Affirmed Baa3 (hyb)
.... Subordinate MTN, Affirmed (P)Baa1
.... Subordinate Regular Bond/Debenture,
Affirmed Baa1
.... BACKED Subordinate Regular Bond/Debenture,
Affirmed Baa1
.... Senior Unsecured Shelf, Affirmed
(P)A1
.... Counterparty Risk Assessment, Affirmed
Aa2(cr)
.... Counterparty Risk Assessment, Affirmed
P-1(cr)
..Issuer: Abbey National Capital LP I
.... BACKED Pref. Stock Non-cumulative,
Affirmed Baa3 (hyb)
..Issuer: Abbey National Capital LP II
....BACKED Pref. Stock Shelf,
Affirmed (P)Baa3
..Issuer: Abbey National Capital Trust I
.... BACKED Pref. Stock Non-cumulative,
Affirmed Baa3 (hyb)
..Issuer: Abbey National Capital Trust II
.... BACKED Pref. Shelf, Affirmed
(P)Baa3
..Issuer: Abbey National North America LLC
.... BACKED Commercial Paper, Affirmed
P-1
..Issuer: Abbey National Treasury International Ltd.
.... BACKED Senior Unsecured MTN, Affirmed
(P)A1
.... BACKED Other Short Term, Affirmed
(P)P-1
..Issuer: Abbey National Treasury Services plc
.... BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed A1 Positive
.... BACKED Commercial Paper, Affirmed
P-1
.... ST Bank Deposits (Foreign Currency),
Affirmed P-1
.... BACKED Senior Unsecured MTN, Affirmed
(P)A1
.... BACKED Subordinate MTN, Affirmed
(P)Baa1
.... Senior Unsec. Shelf, Affirmed
(P)A1
.... BACKED Preference Shelf, Affirmed
(P)Baa3
.... BACKED ST Deposit Note/CD Program,
Affirmed P-1
.... BACKED Other Short Term, Affirmed
(P)P-1
.... BACKED Senior Unsec. Shelf,
Affirmed (P)A1
.... Counterparty Risk Assessment, Affirmed
Aa2(cr)
.... Counterparty Risk Assessment, Affirmed
P-1(cr)
..Issuer: Abbey National Treasury Services plc (Paris)
.... BACKED Senior Unsecured MTN, Affirmed
(P)A1
.... BACKED Other Short Term, Affirmed
(P)P-1
.... Counterparty Risk Assessment, Affirmed
Aa2(cr)
.... Counterparty Risk Assessment, Affirmed
P-1(cr)
..Issuer: Abbey National Treasury Services PLC (US
Br.)
.... Commercial Paper, Affirmed P-1
.... Counterparty Risk Assessment, Affirmed
Aa2(cr)
.... Counterparty Risk Assessment, Affirmed
P-1(cr)
..Issuer: Alliance & Leicester plc
.... LT Issuer Rating (Foreign Currency),
Affirmed A1 Positive
.... Senior Unsecured MTN, Affirmed
(P)A1
.... Junior Subordinate MTN, Affirmed
(P)Baa2
.... Subordinate MTN, Affirmed (P)Baa1
....Subordinate Regular Bond/Debenture,
Affirmed Baa1
..Issuer: AN Structured Issues Limited
.... BACKED Senior Unsecured MTN, Affirmed
(P)A1
.... BACKED Other Short Term, Affirmed
(P)P-1
..Issuer: Santander UK Group Holdings plc
.... LT Issuer Rating, Affirmed Baa1
Stable
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa1 Stable
....Subordinate Regular Bond/Debenture,
Affirmed Baa1
.... Pref. Stock Non-cumulative,
Affirmed Ba2 (hyb)
.... Other Short Term, Affirmed (P)P-2
.... Senior Unsecured MTN, Affirmed
(P)Baa1
.... Subordinate MTN, Affirmed (P)Baa1
....Senior Unsecured Shelf, Affirmed
(P)Baa1
Outlook Actions:
..Issuer: Santander UK PLC
....Outlook, Changed To Stable(m) From
Stable
..Issuer: Abbey National Treasury International Ltd.
....Outlook, Changed To Positive From
Stable
..Issuer: Abbey National Treasury Services plc
....Outlook, Changed To Stable(m) From
Stable
..Issuer: Abbey National Treasury Services plc (Paris)
....Outlook, Changed To Positive From
Stable
..Issuer: Alliance & Leicester plc
....Outlook, Changed To Stable(m) From
Stable
..Issuer: AN Structured Issues Limited
....Outlook, Changed To Positive From
Stable
..Issuer: Santander UK Group Holdings plc
....Outlook, Remains Stable
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.
Dany Castiglione
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
Nicholas Hill
Managing Director
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 upgrades Santander UK's long term deposit rating to Aa3 with stable outlook; the outlook on the bank's issuer rating changed to positive
