Reuters logo
TEXT-Fitch affirms KBC Group at 'A-'; outlook stable
July 3, 2012 / 12:07 PM / in 5 years

TEXT-Fitch affirms KBC Group at 'A-'; outlook stable

July 03 - Fitch Ratings has affirmed KBC Bank‘s, KBC Verzekeringen N.V.’s (KBC Insurance) and holding company KBC Group’s Long-term Issuer Default Ratings (IDRs) at ‘A-'. The Outlooks are Stable. At the same time, the agency has affirmed KBC Insurance Insurer Financial Strength (IFS) at ‘A-'. A full list of rating actions is at the end of this comment.

KBC Bank’s and KBC Group’s Long-term IDRs are driven by an extremely high probability of potential support from the Belgian state (‘AA’/Negative) if required and are at their Support Rating Floors. Their Short-term IDRs have been affirmed at ‘F1’, the higher of the two mapping options which link Short-term and Long-term IDRs generally applied by Fitch. This reflects the agency’s belief that potential additional support from the Belgian state is more certain in the short-term.

KBC Bank’s and KBC Group’s IDRs are not likely to be downgraded unless there is a clear reduction in the state’s willingness to provide such support for the bank and/or the group. While there is clear intent in developed markets to reduce state support for banks in the medium term, and force shareholders and creditors, rather than taxpayers, to take losses, Fitch does not expect such a change in Belgium in the short-term given the current market turbulence. Furthermore, despite the Negative Outlook on the Belgian sovereign rating, a one notch downgrade in this rating would not, necessarily cause a change in Fitch’s view of the probability of support and would not result in an automatic downgrade in the IDRs or in the Support Rating Floor of the bank or of the group.

KBC Bank’s Viability Rating continues to reflect its strong franchise in Belgium, the adequate quality of the loan book (despite some deterioration) and its healthy funding base. It also factors in pressure on profitability, exposure in Ireland as well as in central and eastern Europe (CEE) and reduced financial flexibility as KBC Group pays back state hybrid capital received in 2009. The Viability Rating could benefit from a track record of stable profits, reduced risk appetite and emancipation from state support, but this will take time.

KBC Insurance’s ratings reflect a solid 248% solvency margin in Q112 (2011: 201%); strong business positions in both Belgium and CEE, and a volatile profitability with a EUR30m net profit at end-2011 (2010: EUR630m). The equalisation of KBC Insurance’s Insurer Financial Strength (IFS) and IDR ratings reflects the continuing material government support for the group by means of hybrid capital. The group’s ‘A-’ IDR places a cap on KBC Insurance’s IFS rating.

Upgrade triggers for KBC Insurance’s IFS include an upgrade of KBC Group’s rating or the government payback. Downgrade triggers include a decline of KBC Group’s rating; a revision of its strategic core status prompted by a significant and sustainable deterioration in its profitability or a negative new business margin, or a regulatory solvency ratio below 150%.

Fitch has also affirmed the IFS rating of KBC Group Re, the group’s wholly owned core captive reinsurance subsidiary based in Luxembourg, at ‘A-'. An upgrade of KBC Group’s rating could trigger an upgrade for KBC Group Re. Conversely a decline of KBC Group’s rating or a major deterioration on its CDO book could likely trigger a downgrade for KBC Group Re.

Debt of KBC IFIMA N.V, KBC Financial Products International, Ltd, KBC North America Finance Corp and KBC Bank Ireland plc is rated based on guarantees from KBC Bank. Hybrid capital issues were upgraded on January 31, 2012 and are notched down from KBC Bank’s Viability Rating in line with the criteria report, ‘Rating Bank Regulatory Capital and Similar Securities’ dated 15 December 2011 available at www.fitchratings.com.

The group has strong domestic franchises; KBC Bank is one of the three largest Belgian banks with 20% of deposits and KBC Verzekeringen N.V. one of the main insurers with market shares of 16% in life and 8% in non-life. The group is also present in CEE, especially through its banking activities, which has led to increased impairment charges. The bank and insurance company are managed in an integrated manner in terms of business, strategy, risk and capital.

The rating actions are as follows:

KBC Bank

- Long-term IDR affirmed at ‘A-', Outlook Stable

- Short-term IDR affirmed at ‘F1’

- Viability Rating affirmed at ‘bbb-’

- Support Rating affirmed at ‘1’

- Support Rating Floor affirmed at ‘A-’

- Senior debt affirmed at ‘A-’

- Commercial paper affirmed at ‘F1’

- Preferred stock affirmed at ‘B+’

KBC IFIMA N.V.

- Senior debt affirmed at ‘A-’

- Short term debt: affirmed at ‘F1’

- Subordinated debt affirmed at ‘BB+’

- Market linked securities affirmed at ‘A-emr’

KBC Financial Products International, Ltd.

- Senior debt affirmed at ‘A-’

- Commercial paper affirmed at ‘F1’

KBC North America Finance Corp.

- Commercial paper affirmed at ‘F1’

KBC Bank Ireland plc

- Commercial paper affirmed at ‘F1’

KBC Funding Trust II, KBC Funding Trust III, KBC Funding Trust IV

- Preferred stock affirmed at ‘B+’

KBC Group

- Long-term IDR affirmed at ‘A-', Outlook Stable

- Senior debt affirmed at ‘A-’

- Short-term IDR affirmed at ‘F1’

- Support Rating affirmed at ‘1’

- Support Rating Floor affirmed at ‘A-’

KBC Verzekeringen N.V. (KBC Insurance)

- IFS rating affirmed at ‘A-', Outlook Stable

- Long-term IDR affirmed at ‘A-', Outlook Stable

KBC Group Re

- IFS rating affirmed at ‘A-', Outlook Stable

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