Fitch Upgrades Spain's Instituto de Credito Oficial's to 'BBB+'; Outlook Stable

Mon Apr 28, 2014 11:52am EDT

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(The following statement was released by the rating agency) LONDON/BARCELONA/MILAN, April 28 (Fitch) Fitch Ratings has upgraded Instituto de Credito Oficial's (ICO) Long-term Issuer Default Rating (IDR) to 'BBB+' from 'BBB' and revised its Support Rating Floor (SRF) to 'BBB+' from 'BBB'. The Outlook on ICO's Long-term IDR is Stable. At the same time, the agency has affirmed the Short-term IDR at 'F2' and the Support Rating at '2'. A full list of rating actions is available at the end of this rating action commentary. The agency has also upgraded ICO's Long-term programme ratings and its Long-term senior debt to 'BBB+', its market linked securities to 'BBB+(emr)' while its Short-term programme ratings and commercial paper issues have been affirmed at 'F2'. The rating action follows the upgrade of Spain's sovereign rating to 'BBB+'/Stable from 'BBB'/Stable on 25 April 2014 (see Fitch Upgrades Spain to 'BBB+'; Outlook Stable on www.fitchratings.com). KEY RATING DRIVERS - IDRS, SR, SRF AND SENIOR DEBT ICO's IDRs and senior debt ratings are equalised with those of its 100% shareholder, the Spanish government (BBB+/Stable/F2) and are based on our view that there is a high probability that ICO would receive support from the Spanish sovereign if needed. Spain has provided a guarantee for all debt and obligations incurred by ICO when raising funds. This guarantee is explicit, irrevocable, unconditional and direct. ICO's ratings reflect its role as a policy bank that provides medium- and longer-term lending to the private and public sector to promote economic and social development in Spain. Lending is driven by the Spanish government's policies. The Spanish government appoints ICO's CEO, sets the institution's annual debt limits and exercises control over its operations. In addition to its ordinary lending activity, ICO supported autonomous communities by refinancing their debt maturities in 2012 and contributed to a special purpose fund established to pay the arrears of local governments. For 2014, ICO aims to expand the offer of import-export facilities to more Spanish companies and act as a catalyst for venture capital investments in Spain. In Fitch's view ICO is of high strategic importance to the state and no other bank can currently replace ICO's role as the state's financial arm. Under Spanish law, the government is committed to maintain ICO's regulatory Tier 1 ratio above 9.5%. At end-2013, the ratio was considerably higher at 19.7%, which demonstrates the government's commitment to keep the bank adequately capitalised. The Stable Outlook reflects that on Spain's Long-term IDR. Fitch does not assign a Viability Rating to ICO as its business model is entirely dependent on the support of its state guarantor. RATING SENSITIVITIES - IDRS, SR, SRF AND SENIOR DEBT ICO's IDRs, Support Rating, Support Rating Floor and senior debt ratings are based on Spain's ratings and are therefore primarily sensitive to changes in the sovereign rating. ICO's ratings are also sensitive to changes in the bank's strategic importance to the government, which Fitch currently does not expect. The rating actions are as follows: Long-term IDR upgraded to 'BBB+' from 'BBB'; Outlook Stable Short-term IDR affirmed at 'F2' Support Rating affirmed at '2' Support Rating Floor revised to 'BBB+' from 'BBB' Long-term programme and long-term senior debt upgraded to 'BBB+' from 'BBB' Market-linked securities upgraded to 'BBB+emr' from 'BBBemr' Short-term programme and commercial paper affirmed at 'F2' Contact: Primary Analyst Cristina Torrella Senior Director +34 93 323 8405 Fitch Ratings Espana, S.A.U. Paseo de Gracia 85, 7th Floor 08008 Barcellona Secondary Analyst Alessandro Musto Associate Director +39 02 87 90 87 201 Committee Chairperson Christian Scarafia Senior Director + 44 20 3530 1012 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, 'Global Financial Institutions Rating Criteria' dated 31 January 2014, are available on www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status null/gws/en/disclosure/solicitation?pr_id=827947 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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