Reuters logo
Fitch Affirms Santander Totta at 'BBB'; Outlook Stable
April 28, 2017 / 3:30 PM / 8 months ago

Fitch Affirms Santander Totta at 'BBB'; Outlook Stable

(The following statement was released by the rating agency) BARCELONA/LONDON, April 28 (Fitch) Fitch Ratings has affirmed the Long-Term Issuer Default Rating's (IDRs) of Santander Totta, SGPS, S.A. and Banco Santander Totta, S.A. (BST). The Outlook on these ratings is Stable. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS IDRS, SENIOR DEBT AND SUPPORT RATING The IDRs of Santander Totta and its fully-owned bank subsidiary, BST, reflect Fitch's view that there is a high probability of support from its Spanish parent bank Banco Santander, S.A. (Santander; A-/Stable) if needed, given Santander Totta's activities in Portugal are strategically important to the group. This is reflected in the Support Ratings (SR) of '2'. The Long-Term IDRs of both entities stand at 'BBB' and are capped at two notches above that of the Portuguese sovereign (BB+/Stable), in line with the limitations on notching banks above the sovereign, as per Fitch's criteria. The Stable Outlooks on these IDRs mirror that of the sovereign. Available support from the parent is reflected in the higher of the two possible Short-Term IDRs for banks with a Long-term IDR of 'BBB'. VR Santander Totta's Viability Rating (VR) is underpinned by the bank's capitalisation, which provides a moderate buffer against the risks of operating in a vulnerable economic environment. The rating also factors in better-than-sector average asset quality indicators, its growing franchise, the benefits from being part of the Santander group in terms of management expertise and potential contingent funding, and the challenge of successfully integrating Banco Internacional do Funchal, S.A.'s (Banif) assets and liabilities acquired in late 2015. At end-2016, Santander Totta's capitalisation compared well with local peers, but remained vulnerable to risks arising from its operating environment. The entity's phased-in and fully loaded CET1 ratios stood at 15.7% and 14.9%, respectively, and, together with good coverage levels for impaired loans, provide meaningful buffers against unexpected asset quality shocks. The bank's asset quality metrics remain better than the sector average despite worsening in 2016 due to the lower quality of the loan portfolio acquired from Banif, which led to an increase in the credit-at-risk (CaR) to total loans ratio from 4.4% at end-2015 to 6.4% at end-2016. Fitch believes that the bank is well-placed to manage down these risks given its prudent risk-management approach. The Banif acquisition enhanced BST's national market share, revenue generation capacity and profitability. Profitability remained resilient in 2016, with higher fee and interest income offsetting an increase in operating expenses due to integration costs. While economic growth prospects are muted, Fitch expects further improvements in profitability metrics in the medium term, driven primarily by from lower retail deposits rates, Banif-related synergies and good cost control. Loan impairment charges should be manageable, although they remain sensitive to economic uncertainty. Fitch equalises theVRs) of Santander Totta and its wholly-owned banking subsidiary BST to reflect common supervision, moderate double leverage and the dominance of BST in the Santander Totta group. RATING SENSITIVITIES IDRS, SENIOR DEBT AND SUPPORT RATING The IDRs of Santander Totta and BST are sensitive to a change in the sovereign rating. The IDRs and the SR are also sensitive to a change in Fitch's assumptions around Santander's propensity or ability to support its Portuguese subsidiary. In a higher sovereign rating environment, these would likely be notched down once from the parent's IDR, underpinned by the strategic importance of the subsidiaries, but also supported by common branding, strong synergies and integration with the parent, and a wide range of shared risk management and operational policies and procedures. VR An upgrade of Santander Totta and BST's VRs would be contingent on an upgrade of the sovereign rating, together with improvements in asset quality and profitability. Conversely, asset quality deterioration or a reduction in capitalisation levels would be rating negative. Additionally, the VR of Santander Totta is also sensitive to an increase in double leverage. The rating actions are as follows: Santander Totta: Long-Term IDR: affirmed at 'BBB'; Outlook Stable Short-Term IDR: affirmed at 'F2' VR: affirmed at 'bb+' Support Rating: affirmed at '2' BST: Long-Term IDR: affirmed at 'BBB'; Outlook Stable Short-Term IDR: affirmed at 'F2' VR: affirmed at 'bb+' Support Rating: affirmed at '2' Senior unsecured debt: affirmed at 'BBB' Commercial paper: affirmed at 'F2' Contact: Primary Analyst Josu Fabo, CFA Director +34 93 494 3464 Fitch Ratings Espana, S.A.U. Avinguda Diagonal, 601, 2nd Floor 08028 Barcelona Secondary Analyst Arnau Autonell Associate Director +44 20 3530 1712 Committee Chairperson Bjorn Norrman Senior Director +44 20 3530 1330 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Pilar Perez, Barcelona, Tel: +34 93 323 8414, Email: pilar.perez@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 Solicitation Status here#solicitation 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 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 here. 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