Reuters logo
7 months ago
Fitch Affirms Astoria Financial's 'BBB-/F3' IDRs; Rating Watch Positive Removed
December 21, 2016 / 8:31 PM / 7 months ago

Fitch Affirms Astoria Financial's 'BBB-/F3' IDRs; Rating Watch Positive Removed

14 Min Read

(The following statement was released by the rating agency) NEW YORK, December 21 (Fitch) Fitch Ratings has affirmed the 'BBB-/F3' Long-Term and Short-Term Issuer Default Ratings (IDRs) of Astoria Financial Corp. (AF) and its principal banking subsidiary, Astoria Bank. The Rating Watch Positive is removed and a Stable Outlook assigned. On Dec. 20, AF and New York Community Bancorp (NYCB; 'BBB+/F2'/Outlook Stable) announced that their boards of directors have mutually agreed not to extend the companies' definitive merger agreement, and to terminate the agreement effective Jan. 1, 2017. A complete list of rating actions follows at the end of this release. KEY RATING DRIVERS IDRS, VIABILITY RATINGS, AND SENIOR DEBT Today's action reflects the announcement that both AF and NYCB have terminated their agreement to merge. Per our Rating Action Commentary on April 7, Fitch noted that should AF's merger with NYCB not close, we would evaluate the reason and assess AF's ratings accordingly. The Rating Watch has been removed and a Stable Outlook assigned to reflect our expectation that the company's financial profile has not changed significantly over the past 12 months and that trends in the company's key credit metrics will persist over the near-to-medium term. Key rating constraints include AF's below-peer profitability, liability sensitive balance sheet positioning, and relatively weaker liquidity profile compared to similarly-rated bank peers. Fitch notes AF's earnings performance will remain under pressure over the near term given the bank's liability-sensitive balance sheet and our expectation that the U.S. Federal Reserve will further increase interest rates in 2017 and beyond. Since late 2015, management has been focused on preparing for and ultimately completing its merger with NYCB. Fitch believes this could have caused some distraction in running the core ongoing operations of the bank, including executing longer-term initiatives related to interest rate risk management and improving the bank's liability sensitivity as well as retaining key personnel. Although the outlook is Stable, we believe that the regulatory issues driving the termination of the merger cast a degree of uncertainty over AF's risk profile and risk management. Offsetting these ratings constraints and questions, the ratings continue to be supported by AF's good asset quality, solid underwriting, and strong capital position. Fitch notes that AF's historical loss experience was fairly low through the last credit cycle and the company maintains a very strong, above-peer level capital position with a CET1 ratio of 17.58% at Sept. 30, 2016. SUPPORT RATING AND SUPPORT RATING FLOOR AF has a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, AF is not systemically important and therefore, the probability of support is unlikely. IDRs and Viability Ratings (VRs) do not currently incorporate any support. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES AF's preferred securities are rated five notches below its VR. Preferred stock is notched two times from the VR for loss severity, and three times for non-performance. LONG- AND SHORT-TERM DEPOSIT RATINGS AF's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default. HOLDING COMPANY AF has a bank holding company (BHC) structure with the bank as the main subsidiary. IDRs and VRs are equalized with those of AF's operating company and bank reflecting its role as the BHC, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Double leverage is considered manageable at 109% as of Sept. 30, 2016. RATING SENSITIVITIES IDRs, VRS, AND SENIOR DEBT Fitch believes the current rating level has limited upside of over the near-to-intermediate term. AF's ratings are highly sensitive to its ability to retain key personnel following the cessation of the acquisition. In addition, AF ratings would also be very sensitive to its interest rate positioning in a rising rate environment. To the extent AF has increased liability sensitivity, ratings could be negatively pressured. Should any unanticipated adverse regulatory findings emerge, Fitch would likely take negative rating action. Fitch will be monitoring for any other negative implications from the termination of this acquisition, and are sensitive to AF's strategic options following this announcement. Although not anticipated, Fitch considers AF's ratings to also be sensitive to asset quality deterioration. Aggressive capital management could also negatively impact ratings, although that, too, is not expected in the near term. SUPPORT RATING AND SUPPORT RATING FLOOR AF's Support Rating and Support Rating Floor are sensitive to Fitch's assumption as to capacity to procure extraordinary support in case of need. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES The ratings of subordinated debt and other hybrid capital issued by AF and its subsidiary are primarily sensitive to any change in AF's VR. LONG- AND SHORT-TERM DEPOSIT RATINGS The ratings of long- and short-term deposits issued by Astoria Bank are primarily sensitive to any change in the company's IDRs. This means that should a Long-Term IDR be downgraded, deposit ratings could be similarly affected. HOLDING COMPANY If AF became undercapitalized or increased its double leverage significantly, there is potential that Fitch could notch the holding company IDR and VR from the ratings of the operating companies. Fitch has affirmed the following ratings: Astoria Financial Corporation --Long-Term IDR at 'BBB-'; assigned Stable Outlook; --Short-Term IDR at 'F3'; --Senior Debt at 'BBB-'; --Preferred Stock at 'B' --Viability Rating at 'bbb-'; --Support Rating at '5'; --Support Rating Floor at 'NF'. Astoria Bank (Formerly Astoria Federal Savings and Loan Association) --Long-Term IDR at 'BBB-'; assigned Stable Outlook; --Short-Term IDRat 'F3'; --Long-term Deposits at 'BBB'; --Short-term Deposits at 'F2' --Viability Rating at 'bbb-'; --Support Rating at '5'; --Support Rating Floor at 'NF'. Contact: Primary Analyst Stefan Kahandaliyanage, CFA Associate Director +1-646-582-4918 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Secondary Analyst Johann Moller, CFA, FRM Associate Director +1-646-582-4954 Committee Chairperson Julie Solar Senior Director +1-312-368-5472 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) 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 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. 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 © 2016 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