/Moody's Investors Service, London, May 15, 12, heading by KASE/ - Moody's
Investors Service has today downgraded by one notch the long-term deposit
ratings of UniCredit Bank Slovakia a.s. to Baa2, with a stable outlook, from
Baa1, and the long-term debt and deposit ratings of ATF Bank (Kazakhstan) to
B1, with a stable outlook, from Ba3.
These rating actions primarily reflect the reduced capacity of the parent banking
group (UniCredit SpA) to provide capital and funding support, if needed, to its
subsidiaries, as indicated by the recent one-notch downgrade on of UniCredit
SpA to A3 negative; C-/baa2 negative. For further details see press release
http://www.moodys.com/research/Moodys-downgrades-Italian-banks-outlooks-
remain-negative-PR_244732 published on 14 May 2012.
At the same time, Moody's confirmed UniCredit's Polish subsidiary Pekao SA's
A2 deposit ratings with a negative outlook and standalone bank financial
strength rating (BFSR) of C- (mapping to baa1 on the long-term scale) with a
stable outlook.
Today's rating actions on these subsidiaries conclude the reviews initiated on
16 November 2011, when the ratings of these subsidiaries were placed on
review for downgrade, following a similar rating action on UniCredit SpA.
Full list of affected ratings is provided at the end of the press release. For
additional information on bank ratings, please refer to the webpage containing
Moody's related announcements
http://www.moodys.com/bankratings2012.
RATINGS RATIONALE FOR SLOVAK AND KAZAKH SUBSIDIARIES
The one-notch downgrades of the Slovak and Kazakh subsidiaries of UniCredit
were driven primarily by the weakening capacity and, to a lesser extent,
willingness of the parent to provide timely capital and funding support to its
subsidiaries, if needed.
- WEAKENING CAPACITY OF THE PARENT BANK TO PROVIDE SUPPORT
Moody's says that the lowering of UniCredit's standalone credit assessment to
baa2, as announced yesterday, reflects (i) weakening profitability and asset
quality; (ii) restricted access to market funding; and (iii) the increasingly
difficult operating environment that the group faces, particularly in the Italian
market, where conditions have deteriorated significantly since H1 2011. Under
Moody's Joint Default Analysis methodology, the long-term ratings of the Slovak
and Kazakh subsidiaries incorporate uplift from parental support assumptions; the
one-notch lowering of UniCredit's standalone credit strength results in a
corresponding rating downgrade for the subsidiaries.
- SHIFTING STRATEGIC PRIORITIES ALSO AFFECT WILLINGESS TO
PROVIDE SUPPORT
The rating action on the Kazakh and Slovak subsidiaries also takes into
account, albeit to a lesser extent, Moody's view that UniCredit SpA's willingness
to extend financial support to some peripheral international subsidiaries has
weakened.
Many Western European banks, including UniCredit, are facing difficult choices
regarding the allocation of their scarce capital and funding resources. This has
implications for those international subsidiaries whose medium-term profitability
potential has been impaired by the ongoing financial crisis and/or are located in
the countries that have reduced strategic significance for UniCredit group.
Accordingly, as the parent group aims to refocus on its core operations, Moody's
considers that UniCredit's willingness to provide capital and funding resources
to these subsidiaries has weakened compared to the pre-crisis period.
ATF BANK - WHAT COULD MOVE THE RATINGS UP/DOWN
In the short-term, ATF Bank's ratings are unlikely to be upgraded as it has been
a consistently loss-making for the past few years, requiring a parental guarantee
for over 40% of its loans. In the medium-term, a sustainable improvement in the
bank's earnings and reductions in loan-loss provisions, leading to increases in
net income and capital, could exert upward pressure on the ratings. Conversely,
a further material weakening of ATF Bank's earnings generation, further
eroding its capital and franchise, could lead to a downgrade of its ratings. In
addition, further significant downward pressure on UniCredit's ratings could
impact ATF's ratings.
UNICREDIT BANK SLOVAKIA - WHAT COULD CHANGE THE RATINGS
UP/DOWN
Currently, UniCredit Bank Slovakia's ratings reflect its high borrower
concentration, including exposure to commercial real-estate and project
finance, and its weakening asset quality, counterbalanced by its solid franchise
in the Slovak market relative to its peers and its adequate capitalisation
levels.
In the medium-term a sustained reduction in borrower concentration and
improvement in asset quality could exert upward pressure on the bank's ratings.
Conversely, further deterioration in the bank's financial fundamentals,
particularly related to asset quality, liquidity and capitalisation, could exert
downward pressure on the ratings. In addition, further significant downward
pressure on UniCredit's ratings could impact UniCredit Bank Slovakia's ratings.
- CONFIRMATION OF PEKAO'S RATINGS REFLECTS STANDALONE
RESILIENCE
Pekao's ratings were originally placed on review over concerns regarding how
the challenges facing the parent group could negatively impact the subsidiary's
credit profile. The confirmation of Pekao's ratings reflects Moody's view of the
Polish subsidiary's relatively independent franchise from that of the parent, no
reliance on parental funding, strong standalone financial fundamentals, and
stringent regulatory controls on dividend distributions. These considerations
underpin Moody's view that the bank's credit-profile is partly insulated from the
pressures experienced by its parent and results in Pekao's standalone credit
strength maintained at baa1, one notch higher than the parent's standalone
strength of baa2.
The confirmation of Pekao's long-term deposit rating of A2 results from the
maintenance of a two-notch uplift from Moody's assessment of systemic
support assumptions, given Pekao's systemic importance as the second-largest
franchise in Poland.
- FACTORS THAT INSULATE PEKAO (POLAND) FROM THE PARENT'S
CREDIT RISKS
The following factors underpin Moody's view that the Polish subsidiary is
currently insulated from the credit pressures affecting its Italian parent:
(i) Although Pekao's is majority owned (59%) by UniCredit, the consistency and
transparency of Pekao's strategy is supported by active minority shareholders
and quarterly public disclosures, due to its presence on the Warsaw stock
exchange. Brand association with UniCredit is relatively low and the quality of
Pekao's customer base is not directly correlated with that of the group. This
supports Moody's view of the relative independence of Pekao's franchise from
that of the parent group.
(ii) Pekao has remained one of the stronger performing banks amongst its
Polish peer group during the crisis, with a strong capital base supporting its
franchise and growth. Moody's does not see a material risk of Pekao's capital
base being depleted by dividend transfers to the parent. Moreover, protection of
the strong capital base is supported by the guidelines set by the Polish
regulatory authority (KNF) in 2011 to limit the dividend distributions that Polish
banks, including foreign subsidiaries, can make to their shareholders.
(iii) Pekao remains a fully self-funded institution, with an independent treasury
function and limited non-material exposures to the parent group.
PEKAO - WHAT COULD MOVE THE RATINGS UP/DOWN
Given the current negative outlook on Pekao's deposit ratings, which is aligned
with the negative outlook on UniCredit, an upgrade is unlikely in the near term.
Today's rating actions on Pekao reflect Moody's view of the independence of
the Polish subsidiary's franchise. Nevertheless, the rating agency also
recognises that further deterioration in the parent's financial fundamentals and
downward pressure on the parent ratings could lead to group-wide spill-over
effects that could ultimately weaken Pekao's franchise strength.
Therefore, notwithstanding the relative independence of the Polish subsidiary
at this stage, further significant downward pressure on UniCredit's ratings could
impact Pekao's standalone and long-term ratings.
FULL LIST OF RATING ACTIONS
The following ratings were affected today:
Issuer: ATF Bank
Long-term local- and foreign-currency deposit ratings to B1 from Ba3, with
stable outlook
Foreign currency senior unsecured debt rating to B1 from Ba3, with stable
outlook
Junior subordinate debt rating to B3(hyb) from B2(hyb), with stable outlook
ATF Capital BV senior unsecured global bonds to B1 from Ba3, with stable
outlook
Issuer: UniCredit Bank Slovakia
Long-term local- and foreign-currency deposit ratings to Baa2 from Baa1, with
stable outlook
Short-term local- and foreign-currency deposit ratings of Prime-2 confirmed
Issuer: Bank Polska Kasa Opieki S.A.
Long-term local- and foreign-currency deposit ratings of A2 confirmed, with
negative outlook
Bank financial strength rating of C- confirmed, with stable outlook (mapping to
baa1)
Short-term local- and foreign-currency deposit ratings of Prime-1 confirmed
The following ratings were unaffected:
Issuer: ATF Bank
Bank financial strength rating of E+, with stable outlook (mapping to b3)
Short-term local- and foreign-currency deposit ratings of Not Prime
Issuer: UniCredit Bank Slovakia
Bank financial strength rating of D+, with stable outlook (mapping to ba1)
The methodologies used in these ratings was Bank Financial Strength Ratings:
Global Methodology published in February 2007 and Incorporation of Joint-
Default Analysis into Moody's Bank Ratings: Global Methodology published in
March 2012. Please see the Credit Policy page on www.moodys.com for a copy
of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this
announcement provides relevant regulatory disclosures in relation to each
rating of a subsequently issued bond or note of the same series or
category/class of debt or pursuant to a program for which the ratings are derived
exclusively from existing ratings in accordance with Moody's rating practices.
For ratings issued on a support provider, this announcement provides relevant
regulatory disclosures in relation to the rating action on the support provider
and in relation to each particular rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation to the
provisional rating assigned, and in relation to a definitive rating that may be
assigned subsequent to the final issuance of the debt, in each case where the
transaction structure and terms have not changed prior to the assignment of the
definitive rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
The deposit ratings of rated entity Bank Polska Kasa Opieki S.A. were initiated
by Moody's and were not requested by these rated entities.
Rated entity Bank Polska Kasa Opieki S.A. or its agent(s) participated in the
rating process. This rated entity or its agent(s) provided Moody's access to the
books, records and other relevant internal documents of the rated entity.
The ratings have been disclosed to the rated entities or their designated agents
and issued with no amendment resulting from that disclosure
Information sources used to prepare the rating(s) for ATF Bank and Bank
Polska Kasa Opieki S.A. are the following: parties involved in the ratings, and
public information.
Information sources used to prepare the rating(s) for Unicredit Bank Slovakia
and are the following : parties involved in the ratings, public information, and
confidential and proprietary Moody's Investors Service information.
Moody's adopts all necessary measures so that the information it uses in
assigning the ratings 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.
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last rating action and the rating history.
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Irakli Pipia
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
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Yves J Lemay
MD - Banking
Financial Institutions Group
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Releasing Office:
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[2012-05-16]