TEXT - Fitch rates Grupo Cajas Rurales Unidas

Tue Dec 11, 2012 11:01am EST

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(The following statement was released by the rating agency)
    Dec 11 - Fitch Ratings has assigned Spain's Grupo Cooperativo Cajas Rurales
Unidas (Grupo CRU) a Long-term Issuer Default Rating of 'BB'. The Outlook is
Stable. At the same time, Fitch has downgraded Grupo Cooperativo Cajamar (GCC)'s
ratings, removed them from Rating Watch Negative (RWN) and withdrawn them as GCC
has ceased to exist as a banking group backed by a mutual support mechanism. A
full list of rating actions is at the end of this comment.

RATING ACTION RATIONALE

In November 2012, Cajamar Caja Rural, Sociedad de Credito Cooperativo (SCC) and 
Ruralcaja transferred all their assets and liabilities to Cajas Rurales Unidas, 
SCC (CRU), the main bank of Grupo CRU, a new banking group comprising 22 credit 
cooperatives and backed by a mutual support mechanism. In addition to assigning 
ratings to Grupo CRU, Fitch has assigned ratings to its main bank.

Grupo CRU's Long-term IDR is driven by its Support Rating Floor (SRF) of 'BB' 
and has a Stable Outlook. Grupo CRU's Support Rating of '3' and SRF of 'BB' 
reflect Fitch's view that there is a moderate probability that support from the 
Spanish authorities would be forthcoming, if required. This is due to Grupo 
CRU's size (Spain's largest credit cooperative group with pro-forma assets of 
around EUR45bn at end-Q312) and relative importance in its home regions of 
Andalusia, Baleares, Valencia and Murcia; as well as in the Canary Islands.

The 'bb' VR reflects Grupo CRU's poor asset quality with the NPL ratio expected 
to reach 12% at end-2012; high reliance on ECB funding (15% of total); and its 
tight capitalisation relative to its risk profile (unreserved NPLs to equity 
ratio of 77% on a proforma basis at end-Q312). These factors also largely 
support the downgrade of GCC's ratings. 

Grupo CRU's VR also factors in the group's strong regional franchise, which 
provides it with an ample deposit base, low single-name risk concentration and 
the potential for cost synergies from the integration.

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING & SUPPORT RATING FLOOR

The Support Rating and SRF are sensitive to a potential downgrade of the Spanish
sovereign rating or to a change in Fitch's assumptions regarding the Spanish 
authorities' propensity to support Grupo CRU. 

RATING DRIVERS AND SENSITIVITIES - VR

Grupo CRU's VR is under downward pressure as it is particularly sensitive to a 
potentially more protracted and deeper recessionary environment in Spain than 
currently assumed, which could further affect profitability and asset quality 
deterioration. Failure to rebalance its funding mix towards retail sources, 
inability to progressively reduce the commercial gap (the gap between deposits 
and loans) and an underachievement of expected cost synergies could also lead to
a downgrade.

Conversely, a strong retail funding growth resulting in a substantial commercial
gap reduction and an early achievement of synergies would be positive for the 
VR. A potential improvement of the economic environment in Spain would help 
achieve this.

SUBORDINATED DEBT AND STATE GUARANTEED DEBT

Subordinated debt is notched down once from Grupo CRU's VR of 'bb', in 
accordance with Fitch's assessment of this instrument's non-performance and 
relative loss severity risk profile. Its ratings are primarily sensitive to any 
change in Grupo CRU's VR.

The rating of the state-guaranteed debt issued by CRU is in line with the 
Long-term IDR of Spain ('BBB'/Negative) and is thus sensitive to any change in 
this rating.

The impact, if any, on Cajamar's covered bonds will be covered in a separate 
comment.

GCC:

Long-term IDR: Downgraded to 'BB' from 'BBB-', removed from RWN, Outlook Stable;
rating withdrawn

Short-term IDR: Downgraded to 'B' from 'F3', removed from RWN; rating withdrawn

Viability Rating: Downgraded to 'bb' from 'bbb-', removed from RWN; rating 
withdrawn

Support Rating: affirmed at '3', removed from RWN; rating withdrawn

Support Rating Floor: affirmed at 'BB'; rating withdrawn

Cajamar:

Long-term IDR: Downgraded to 'BB' from 'BBB-', removed from RWN, Outlook Stable;
rating withdrawn

Short-term IDR: Downgraded to 'B' from 'F3', removed from RWN; rating withdrawn

State-guaranteed debt: affirmed at 'BBB'; transferred to CRU

Senior unsecured debt long-term rating: Downgraded to 'BB' from 'BBB-', removed 
from RWN; transferred to CRU

Senior unsecured debt short-term rating: Downgraded to 'B' from 'F3', removed 
from RWN; transferred to CRU

Subordinated debt: Downgraded to 'BB-' from 'BB+', removed from RWN; transferred
to CRU

Grupo CRU:

Long-term IDR: Assigned at 'BB'; Outlook Stable

Short-term IDR: Assigned at 'B'

Viability Rating: Assigned at 'bb'

Support Rating: Assigned at '3'

Support Rating Floor: Assigned at 'BB'

CRU:

Long-term IDR: Assigned at 'BB'; Outlook Stable

Short-term IDR: Assigned at 'B'

Support Rating: Assigned at '3'

Support Rating Floor: Assigned at 'BB'

 (Caryn Trokie, New York Ratings Unit)
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