New York, April 11, 2011 -- Moody's Investors Service upgraded the debt and deposit ratings of Sovereign
Bank (long-term deposits to A2 from A3, short-term
to Prime-1 from Prime-2) and its subsidiaries. Sovereign
Bank's C- unsupported bank financial strength rating,
that maps to a Baa1 on the long-term scale, was affirmed.
The rating outlook on Sovereign Bank is stable.
At the same time, Moody's affirmed the ratings on Santander
Holdings USA (SHUSA, preferred stock Ba1(hyb)), Sovereign
Bank's holding company. The rating outlook on SHUSA was changed
to stable from negative. SHUSA is owned by the large Spanish bank,
Banco Santander Central Hispano (Santander, BFSR B-,
senior Aa2).
RATINGS RATIONALE
Moody's rating action on Sovereign Bank reflects the rating agency's
expectation of increased parental support from Santander, which
now results in two notches of lift in its senior ratings. Moody's
notes the substantial resources that Santander has committed to Sovereign
Bank in the form of equity capital, the allocation of Santander
senior executives to manage Sovereign Bank, the use of the Santander
name on the holding company and the Santander name alongside Sovereign
Bank in public, as well as the investment in systems and platforms.
Although SHUSA's long-term ratings also now benefit from
the increased expectation of parental support, there was no change
to its ratings, thus widening the ratings notching between Sovereign
Bank and SHUSA. This greater ratings distinction reflects Moody's
heightened concern over the holding company's risk profile.
This concern stems from SHUSA's ownership of Santander Consumer
USA (SCUSA), a subprime and near-prime U.S.
auto finance company that is reliant on wholesale funding to finance its
operations. Moody's considers the credit profile of SCUSA
to be much weaker than that of the bank. Additionally, Moody's
has concerns regarding the potential for further opportunistic growth
at SCUSA and increased exposure to the subprime auto finance space.
SCUSA has been highly acquisitive, and now accounts for approximately
25% of consolidated loans and two-thirds of consolidated
profitability at SHUSA.
The change in the ratings outlook to stable at SHUSA reflects Moody's
opinion that SHUSA's credit profile will be able to withstand a
more stressed economic environment, which makes downward rating
pressure less likely in the intermediate-term.
Moody's affirmed Sovereign Bank's C- unsupported BFSR,
that maps to a Baa1 on the long-term scale. The rating agency
notes that the bank continues to perform in line with Moody's expectations.
It has bank continued to show signs of stabilization in asset quality
and has recorded four profitable quarters after a series of losses in
the second half of 2008 and 2009.
Moody's last rating action on Sovereign Bank was on August 16, 2010,
when the rating outlook on Sovereign Bank was changed to stable from negative.
The principal methodology used in this rating was Bank Financial Strength
Ratings: Global Methodology published in February, 2007.
Santander Holdings USA, headquartered in Boston, MA reported
total assets of $89.7 billion at December 31, 2010.
Sovereign Bank, headquartered in Wyomissing, PA, reported
total assets of $72.3 billion at December 31, 2010.
Upgrades:
..Issuer: Sovereign Bank
.... Issuer Rating, Upgraded to A2 from
A3
.... OSO Rating, Upgraded to P-1
from P-2
.... Deposit Rating, Upgraded to P-1
from P-2
....OSO Senior Unsecured OSO Rating,
Upgraded to A2 from A3
....Subordinate Regular Bond/Debenture,
Upgraded to A3 from Baa1
....Senior Unsecured Deposit Note/Takedown,
Upgraded to A2 from A3
....Senior Unsecured Deposit Rating,
Upgraded to A2 from A3
..Issuer: Sovereign Real Estate Investment Trust
....Preferred Stock Preferred Stock,
Upgraded to Baa2 from Baa3
Outlook Actions:
..Issuer: Santander Holdings USA, Inc.
....Outlook, Changed To Stable From
Negative
..Issuer: Sovereign Capital Trust IV
....Outlook, Changed To Stable From
Negative
..Issuer: Sovereign Capital Trust V
....Outlook, Changed To Stable From
Negative
..Issuer: Sovereign Capital Trust VI
....Outlook, Changed To Stable From
Negative
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Gregory Frank
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Robert Young
MD - Financial Institutions
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's upgrades Sovereign Bank (long-term deposits to A2; short-term to Prime-1 from Prime-2)