Fitch Assigns BBVA's Tier 1 Capital Securities 'BB-(EXP)'

Mon Apr 29, 2013 1:07pm EDT

Related Topics

(The following statement was released by the rating agency) BARCELONA/LONDON, April 29 (Fitch) Fitch Ratings has assigned Banco Bilbao Vizcaya Argentaria's (BBVA) potential issue of non-step-up non-cumulative perpetual tier 1 capital securities (preferred securities) with fully discretionary coupons and pre-set triggers for contingent conversion an expected rating of 'BB-(EXP)'. BBVA expects to issue a benchmark transaction of preferred securities. This issuance, with fully discretionary coupon payment and pre-set triggers for contingent conversion, is the first of this kind for a Spanish bank. KEY RATING DRIVERS The preferred securities are rated five notches below BBVA's 'bbb+' Viability Rating (VR), in accordance with Fitch's criteria for "Assessing and Rating Bank Subordinated and Hybrid Securities" dated 5 December 2012 at www.fitchratings.com. The notes are notched twice for loss severity as recoveries are expected to be poor, because the preferred securities will rank junior to all liabilities, including subordinated debt and because of conversion into common equity on breach of one of the pre-set triggers. These triggers are set at a 5.125% common equity Tier 1 ratio at a consolidated and unconsolidated level, a 7% consolidated core tier 1 (CT1) ratio as defined by the European Banking Authority (EBA) and a 7% capital principal (Spain's adaption of EBA CT1 ratio) ratio on a consolidated basis. At end-March 2013, BBVA capital ratios were well in excess of these triggers. To reflect the incremental non-performance risk of the notes relative to the risk incorporated by the VR, the notes are notched three times given the instrument's fully discretionary coupon payment, which is deemed to be the most easily activated form of loss absorption. RATING SENSITIVITIES As the notes are notched off BBVA's VR, their rating is primarily sensitive to any change in that rating. The rating sensitivities of the bank's VR include a potential downgrade of the sovereign or a marked deterioration of asset quality and/or profitability as a result of a sustained tough operating environment in Spain. BBVA's vulnerability to weaknesses in the Spanish market are somewhat mitigated by its international diversification, supporting a VR that is one notch above the sovereign Long-term IDR, but at the same time it is not immune to developments in Spain. Contact: Primary Analyst Roger Turro Director +34 93 323 8406 Fitch Ratings Espana Paseo de Gracia, 85 08008 Barcelona Secondary Analyst Erwin Van Lumich Managing Director + 34 93 323 8403 Committee Chairperson Christian Scarafia Senior Director +39 02 87 90 87 212 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Assessing and Rating Bank Subordinated and Hybrid Securities' dated 5 December 2012 is available at www.fitchratings.com. Applicable Criteria and Related Research Assessing and Rating Bank Subordinated and Hybrid Securities here Additional Disclosure Solicitation Status 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 WEBSITE '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. 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.

FILED UNDER: