TEXT - Fitch affirms Santander Totta ratings; outlook negative

Tue Dec 4, 2012 11:36am EST

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(The following statement was released by the rating agency)
    Dec 4 - Fitch Ratings has affirmed Santander Totta SGPS's (Santander Totta)
and its bank subsidiary, Banco Santander Totta SA's (BST), Long-term Issuer
Default Ratings (IDR) at 'BBB-', Short-term IDRs at 'F3', Support Ratings at '2'
and Viability Ratings (VR) at 'bb-'. The Outlook for the Long-term IDRs is
Negative. A full list of rating actions is at the end of this commentary.

Santander Totta is a Portuguese holding company wholly owned by the Spanish 
bank, Banco Santander S.A (Santander; 'BBB+'/Negative). BST is its main 
operating subsidiary and is Portugal's fourth largest bank.

BST and Santander Totta's ratings are the same because the two share the same 
regulator and are viewed as a consolidated entity, the bank is wholly-owned by 
the holding company, common branding is applied to both entities and the holding
company has no outstanding debt.

RATING DRIVERS AND SENSITIVITIES - IDRs, SUPORT RATINGS AND SENIOR DEBT RATINGS

The affirmation of Santander's Totta and BST's IDRs reflect a high probability 
of support from Santander, as expressed by a '2' Support Rating. The Long-term 
IDRs are one notch higher than the Portuguese sovereign's ('BB+'/Negative). 

Nevertheless, Banco Santander's propensity and ultimate ability to provide full 
and timely support to Santander Totta and BST is likely to be linked to banking 
sector and sovereign risks in Portugal, which are closely correlated. The two 
entities' IDRs are therefore sensitive to a further downgrade of the sovereign 
rating and/or of Santander's IDRs, indicated by their Negative Outlook.

RATING DRIVERS AND SENSITIVITIES - PREFERENCE SHARES

BST's preference shares have been affirmed at 'BB-' and remain capped at the 
level assigned to equivalent securities issued by the parent bank in line with 
Fitch's criteria on 'Rating Bank Regulatory Capital and Similar Securities' 
(dated 15 December 2011 at www.fitchratings.com). 

The rating of BST's preference shares remains sensitive to a downgrade of 
Santander's VR and/or BST's IDR.

RATING DRIVERS AND SENSITIVITIES - VRs

The two entities' VRs reflect BST's good national franchise, which supports 
reasonable earnings generation, efficient cost structure, sound capitalisation 
and an improved funding profile. BST has not required state aid and it is not 
reliant on its parent for funding. The VRs also take into account market funding
constraints and the challenge to maintain asset quality and profitability at 
levels which compare favourably to peers' amid weak economic prospects in 
Portugal.  

The banks' VRs are sensitive to a further deterioration in the operating 
environment, ongoing market funding constraints and/or of further pressure on 
asset quality.

The ratings actions are as follows:

Santander Totta:
Long-term IDR affirmed at 'BBB-', Outlook Negative
Short-term IDR affirmed at 'F3'
Viability Rating affirmed at 'bb-'
Support Rating affirmed at '2'
Banco Santander Totta S.A.:
Long-term IDR affirmed at 'BBB-', Outlook Negative
Short-term IDR affirmed at 'F3'
Viability Rating affirmed at 'bb-'
Support Rating affirmed at '2'
Senior debt affirmed at 'BBB-'
Commercial paper and short-term debt affirmed at 'F3' 

 (Caryn Trokie, New York Ratings Unit)
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