April 7, 2017 / 4:59 PM / 4 months ago

Fitch Affirms Liberbank at 'BB'; Outlook Stable

(The following statement was released by the rating agency) BARCELONA/LONDON, April 07 (Fitch) Fitch Ratings has affirmed Liberbank, S.A.'s Long-Term Issuer Default Rating (IDR) at 'BB' and Viability Rating (VR) at 'bb'. The Outlook on its Long-term IDR is Stable. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS IDRS, VR AND SENIOR DEBT The bank's IDRs and VR reflect its large problem assets, including a legacy real estate-related portfolio, relative to capital and its modest profitability. The ratings also factor in its stable funding structure and liquidity position. Liberbank's asset quality is heavily affected by a legacy portfolio of foreclosed real-estate assets and loans to developers that until end-2016 was under an asset protection scheme (APS) granted by Spain's deposit guarantee fund. This portfolio is carried at fair value with expected losses calculated by an independent consultant. This exposure results in a problem asset ratio (including non-performing loans and foreclosed assets) well above domestic peers at 20.9% at end-2016.The volume of problem assets decreased by 22% yoy in 2016 and we expect the bank to actively further reduce this exposure in the coming years, helped by the recovery of the property sector in Spain. In our view, the bank's capitalisation is maintained with moderate buffers over regulatory minimums. In line with our expectations, the bank's fully loaded Common Equity Tier 1 (CET1) ratio declined to 10.7% at end-2016 (from 11.7% at end-2015), as a result of the increase in risk-weighted assets following the expiration of the APS. At end-2016 unreserved problem assets accounted for 2x the fully loaded CET1, meaning that capital is highly vulnerable to asset quality shocks. Liberbank is focused on retail banking activities in its home regions, Asturias, Castile-La Mancha and Extremadura, where it has high market shares. However, the bank's profitability remains under pressure amid the low interest-rate and business volume environment. Its effort to cut funding and operating costs together with lower loan impairment charges should provide some relief, although we anticipate that profitability will remain modest in 2017. Liberbank's funding structure is well balanced with customer deposits fully funding the loan book. The bank's liquidity position is adequate as debt maturities are manageable and well spread over time. Refinancing risk is limited in light of the bank's ample stock of unencumbered ECB-eligible assets. Banco de Castilla-La Mancha (Banco CLM) is a 75%-owned bank subsidiary of Liberbank and fully consolidated into the group's accounts. Banco CLM is highly integrated into the group, including in terms of capital and liquidity fungibility between the entities, hence Fitch assigns a common VR. The group's management is centralised at Liberbank, underlining Fitch's view that individual credit profiles cannot be meaningfully disentangled. Banco CLM strengthens the group's franchise in Castile-La Mancha and provides geographical diversification. SUPPORT RATING AND SUPPORT RATING FLOOR Liberbank's and its subsidiary's Banco CLM's Support Ratings (SR) of '5' and Support Rating Floors (SRF) of 'No Floor' reflect Fitch's belief that senior creditors of the banks can no longer rely on receiving full extraordinary support from the sovereign in the event that Liberbank becomes non-viable. The EU's Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism (SRM) for eurozone banks provide a framework for resolving banks that is likely to require senior creditors participating in losses, instead of, or ahead of a bank receiving sovereign support SUBORDINATED DEBT Liberbank's subordinated Tier 2 debt issue is rated one notch below its VR to reflect the notes' greater expected loss severity than senior unsecured debt. RATING SENSITIVITIES IDRS, VR AND SENIOR DEBT Upside rating potential could arise from a swift and material reduction in the bank's stock of problem assets without erosion of the capital ratios. Improvements in core banking earnings that result in better internal capital generation would also be ratings-positive. Conversely, a rating downgrade could come from an inability to significantly manage down its stock of problem assets which would keep capital at risk from asset quality shocks. A material deterioration in the bank's funding and liquidity profile would also put pressure on the ratings. Banco CLM's ratings are sensitive to a change in its integration in the group, which Fitch does not currently expect. SUPPORT RATING AND SUPPORT RATING FLOOR An upgrade of the SR and upward revision of the SRF would be contingent on a positive change in the sovereign's propensity to support its banks. While not impossible, this is highly unlikely, in Fitch's view. SUBORDINATED DEBT The rating of Liberbank's subordinated debt is primarily sensitive to a change in the bank's VR. The rating actions are as follows: Liberbank Long-Term IDR: affirmed at 'BB'; Outlook Stable Short-Term IDR: affirmed at 'B' VR: affirmed at 'bb' Support Rating: affirmed at '5' SRF: affirmed at 'No Floor' Subordinated debt: affirmed at 'BB-' Banco CLM Long-Term IDR: affirmed at 'BB'; Outlook Stable Short-Term IDR: affirmed at 'B' VR: affirmed at 'bb' Support Rating: affirmed at '5' SRF: affirmed at 'No Floor' Senior unsecured debt: affirmed at 'BB' Contact: Primary Analyst Josu Fabo, CFA Director +34 93 494 34 64 Fitch Ratings Espana, S.A.U. Avinguda Diagonal, 601, 2nd Floor 08029 Barcelona Secondary Analyst Arnau Autonell Associate Director +44 20 3530 1712 Committee Chairperson Olivia Perney Guillot Senior Director +33 1 44 29 91 74 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1021892 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT <a href="https://www.fitchratings.com">WWW.FITCHRATINGS.COM.. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE AT <a href="https://www.fitchratings.com/site/regulatory">HTTPS://WWW. FITCHRATINGS.COM /SITE/REGULATORY. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below