TEXT - Fitch rates Grupo Cajas Rurales Unidas
(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time, Fitch has downgraded Grupo Cooperativo Cajamar (GCC)'s ratings, removed them from Rating Watch Negative (RWN) and withdrawn them as GCC has ceased to exist as a banking group backed by a mutual support mechanism.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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