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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Related Issuers
Rating Action:

Moody's upgrades Siauliu Bankas' deposit rating to Ba1; outlook stable

16 Jun 2016

Madrid, June 16, 2016 -- Moody's Investors Service has today upgraded Siauliu Bankas, AB's (Lithuania) deposit ratings to Ba1 from Ba2. The rating agency has also upgraded the bank's baseline credit assessment (BCA) and adjusted BCA to ba3 from b1; and the bank's Counterparty Risk Assessment (CR Assessment) to Baa3(cr)/Prime-3(cr) from Ba1(cr)/Not-Prime(cr). The outlook on the long-term deposit ratings is stable.

The bank's Not Prime short-term deposit ratings are unaffected by today's rating action.

This rating action reflects the improvement of Siauliu Bankas' credit fundamentals, notably in terms of capital and profitability.

A list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

---RATIONALE FOR UPGRADING THE BCA

The upgrade of Siauliu Bankas' BCA to ba3 from b1 reflects the bank's improved credit fundamentals, notably in terms of capital and profitability. At end-December 2015, the bank's tangible common equity to risk-weighted assets ratio increased to 13.7% compared to 10.4% at end-December 2014, mainly as a result of retained profits. In terms of regulatory capital ratios, Siauliu Bankas reported a phased-in Common Equity Tier 1 (CET1) ratio of 12.2% at end-December 2015 compared to 9.3% a year earlier. The bank has been reinforcing its capital buffers in order to comply with new regulatory and prudential capital requirements.

In upgrading Siauliu Bankas' ratings, Moody's has also taken into account the bank's improved profitability, with net profit over tangible assets at 1.17% at end-December 2015 (0.33% at end-December 2014).

While Siauliu Bankas' asset risk has also shown some positive developments (non-performing loans (NPLs) declined to 9.95% of gross loans at year-end 2015 down from 12.74% at year-end 2014), the bank's BCA is restrained by this still high stock of NPLs that compares unfavourably to the average of similarly rated banks (i.e. average NPL ratio of 5% at end-December 2015 for Moody's ba3 BCA banks). When balanced against the bank's asset risk profile, its risk-absorption capacity remains moderate despite the mentioned improvement in capital buffers.

---RATIONALE FOR UPGRADING THE LONG-TERM DEPOSIT RATING

The upgrade of Siauliu Bankas' long-term deposit ratings to Ba1 from Ba2 reflects: (1) The upgrade of the bank's BCA and adjusted BCA to ba3 from b1; and (2) the result from Moody's Advanced Loss-Given Failure (LGF) analysis which results in an unchanged two notches of uplift for the deposit rating. Moody's assigns a low probability of government support to Siauliu Bankas, which results in no further uplift for the deposit rating.

---RATIONALE FOR UPGRADING THE CR ASSESSMENT

As part of today's rating action, Moody's has also upgraded the CR Assessment of Siauliu Bankas to Baa3(cr)/Prime-3 (cr) from Ba1(cr)/Not Prime(cr), three notches above the ba3 adjusted BCA. The CR Assessment is driven by the banks' adjusted BCA, the low likelihood of systemic support and by the cushion against default provided to the senior obligations represented by the CR Assessment by junior deposits amounting to 11% of tangible banking assets.

---RATIONALE FOR THE STABLE OUTLOOK

The outlook on Siauliu Bankas' long-term deposit rating is stable, reflecting Moody's expectations that Lithuania's supportive economic conditions (Moody's expects GDP to grow by 2.9% in 2016 and 3.3% in 2017) will help to preserve current trends in the bank's credit fundamentals.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Siauliu Bankas' standalone BCA could be adjusted upwards if the bank is able to (1) reduce the stock of NPLs, with a continued decline in provisioning costs, (2) achieve a sustainable recovery in its recurring earnings, and/ or (3) increase further its capital buffers.

Downward pressure could develop on Siauliu Bankas' standalone BCA from (1) an acceleration in the trend of NPL formation, both on an absolute level and in relation to the Lithuanian banking system average; (2) a weakening of Siauliu Bankas' internal capital generation and risk-absorption capacity; and/or (3) any worsening in operating conditions beyond Moody's current expectations.

As the bank's deposit rating is linked to the standalone BCA, any change to the BCA would likely also affect this rating. Siauliu Bankas' deposit rating could also change due to changes in the loss-given failure faced by these instruments.

LIST OF AFFECTED RATINGS

Issuer: Siauliu Bankas, AB

..Upgrades:

....Adjusted Baseline Credit Assessment, upgraded to ba3 from b1

....Baseline Credit Assessment, upgraded to ba3 from b1

....Short-term Counterparty Risk Assessment, upgraded to P-3(cr) from NP(cr)

....Long-term Counterparty Risk Assessment, upgraded to Baa3(cr) from Ba1(cr)

....Long-term Deposit Rating, upgraded to Ba1 from Ba2, outlook remains Stable

..Outlook Actions:

....Outlook remains Stable

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.

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 Jose Mori
VP - Senior Credit Officer
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
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 Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's upgrades Siauliu Bankas' deposit rating to Ba1; outlook stable
No Related Data.
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