RPT-Fitch: Benelux Bank Outlook Broadly Stable; Negative for Most Dutch Banks' Ratings

Mon Jan 20, 2014 6:29am EST

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Jan 20 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings says its rating and sector Outlooks for Benelux banks are Stable in 2014, with the exception of the rating Outlooks for most Dutch banks, which are Negative, according to a new report.

The Negative Outlook on ING Bank as and ABN AMRO Bank a€™s aA+a Long-term Issuer Default Ratings (IDRs) mirrors that on the Netherlandsa aAAAa rating. The Negative Outlook on Rabobank Group as aAA-a Long-term IDR reflects pressure on the groupas standalone strengths.

The IDRs of most major Benelux banks include potential additional state support. New European resolution legislation will be a key sensitivity for most Benelux banksa IDRs. The European Parliament is due to vote on the resolution a€œpillara€� of banking union in 1Q14.

Belgian and Luxembourgian banks benefit from a relatively benign economic environment, supporting most of their structural recovery. Overall, Benelux banksa profitability is supported by their domestic franchises, which are large enough to generate healthy efficiency and pre -impairment profitability levels. Revenue is likely to be under pressure from low interest rates and potentially weak demand for loans. Fitch expects a weak economic recovery in the Netherlands in 2014, and loan impairment charges are likely to remain high as a lag effect of two years of recession.

Fitch expects the large Dutch banks to maintain good access to debt markets in 2014, although issuance volumes will likely be relatively modest. This reflects an expectation of weak credit demand and still-low consumer confidence and consumption in the Netherlands, enabling Dutch banks to gather higher volumes of retail deposits. Belgian and Luxembourgian banks are customer deposit rich and therefore less reliant on wholesale funding than Dutch banks.

Fitch does not expect any of the major Benelux banks to report material shortfalls under the European Central Bank as Asset Quality Review. However, requirements to increase the risk weighting for some asset classes, particularly mortgage loans or raise the coverage of impaired loans cannot be ruled out, particularly for the banks with relatively lower reserve coverage.

The report, a€œ2014 Outlook: Major Benelux Banksa€� is available on www.fitchratings.com or by clicking the link below.

Link to Fitch Ratings' Report: 2014 Outlook: Major Benelux Banks

here

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