Fitch Assigns Nationwide's Perpetual Contingent Convertible Securities 'BB+' Final Rating

Tue Mar 11, 2014 1:43pm EDT

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(The following statement was released by the rating agency) LONDON, March 11 (Fitch) Fitch Ratings has assigned Nationwide Building Society's (A/Stable/F1/a) GBP1bn resetting perpetual contingent convertible additional Tier 1 capital securities (the notes) a 'BB+' final rating. The rating is in line with the expected rating assigned on 28 February 2014. KEY RATING DRIVERS The notes are additional Tier 1 instruments with fully discretionary interest payments and are subject to conversion into Nationwide Core Capital Deferred Shares (CCDS) on breach of a 7% CRD IV common equity Tier 1 ratio (either consolidated or solo), which is calculated on a 'fully loaded' basis. The securities are rated five notches below Nationwide's 'a' Viability Rating (VR), in accordance with Fitch's criteria for "Assessing and Rating Bank Subordinated and Hybrid Securities" (dated 31 January 2014). The notes are notched twice for loss severity to reflect the conversion into CCDS on breach of the trigger, and three times for non-performance risk. The notching for non-performance risk reflects the instruments' fully discretionary interest payment, which Fitch considers the most easily activated form of loss absorption. The issuer will not make an interest payment if it has insufficient distributable items or if it is insolvent. The issuer will also be subject to restrictions on interest payments if it fails to meet the combined buffer capital requirements that will partly be phased in from 2016. Fitch has assigned 100% equity credit to the securities. This reflects their full coupon flexibility, the ability to be converted into CCDS, which Fitch considers core capital well before the bank would become non-viable, the permanent nature and the subordination to all senior creditors. RATING SENSITIVITIES As the securities are notched from Nationwide's VR, their rating is mostly sensitive to any change in this rating. The notes' ratings are also sensitive to any change in their notching, which could arise if Fitch changed its assessment of the probability of their non-performance relative to the risk captured in Nationwide's VR. This could reflect a change in capital management or flexibility or an unexpected shift in regulatory buffers, for example. Contact: Primary Analyst Claudia Nelson Senior Director +44 20 3530 1191 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Chris Keeling Analyst +44 20 3530 1494 Committee Chairperson Maria Jose Lockerbie Managing Director +44 20 3530 1083 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, "Global Financial Institutions Rating Criteria," dated 31 January 2014, is available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria 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.

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