RPT-Fitch Affirms Major Benelux Banks' IDRs; Upgrades ABN AMRO's and Belfius's VRs

Fri Jul 25, 2014 7:44am EDT

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July 25 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings affirmed yesterday the Long-term Issuer Default Ratings (IDR) of seven major Benelux banking groups after a peer review. They are ING Bank NV (ING Bank), ABN AMRO Bank NV (ABN AMRO), BNP Paribas Fortis (BNPPF), KBC Bank NV (KBC), Belfius Bank SA/NV (Belfius), Banque Internationale a Luxembourg (BIL) and BGL BNP Paribas (BGL BNPP).

Fitch has published Rating Action Commentaries for each of these groups, which are available on www.fitchratings.com. These include each issuer's key rating drivers and rating sensitivities and lists of all rating actions taken.

The 'A+' Long-term IDRs of the two Dutch banks, ING Bank and and ABN AMRO, and the 'A-' Long-term IDRs of Belfius and BIL are at their respective Support Rating Floors (SRFs) and have Negative Outlooks to reflect Fitch's expectation that sovereign support for banks is likely to decline. Fitch's base case is for these banks' SRFs to be revised down to 'No Floor' in 2H14 or in 1H15, at which point these banks' Long-term IDRs will be driven by their Viability Ratings (VR). See "Sovereign Support for Banks - Rating Path Expectations" available at www.fitchratings.com.

The 'A+' Long-term IDRs of BNPPF and BGL BNPP have Stable Outlooks as they are based on expected support from their French parent, BNP Paribas (A+/Stable/a+). KBC's Long-term IDR has a Stable Outlook as it is already driven by its VR. The upgrade of ABN AMRO's VR to 'a' from 'a-' reflects Fitch's view that management has built a solid track record in successfully implementing its chosen strategy since the 2010 merger of the former ABN AMRO and Fortis Bank Nederland. Fitch expects management to remain fully focused on maintaining a strong balance sheet, and the continuing improvements in the bank's financial metrics, including asset quality and leverage, have been incorporated into the VR upgrade. Fitch's view that the bank should remain on track to improving its financial metrics is supported by the turnaround in the Netherlands' economy this year, which was one driver of the revision of the sovereign rating Outlook to Stable from Negative on 11 July 2014.

The upgrade of Belfius's VR to 'bbb+' from 'bb+' reflects substantial improvement in the bank's main credit metrics resulting from progress made on restructuring, including the gradual phasing-out of legacy issues, its focus on growing revenue and improving cost efficiency. Fitch's expectations that management will continue to execute on its plans to strengthen the bank's fund=amentals have been factored into the bank's VR.

The VRs of other banks were affirmed at 'a' (ING Bank and BNPPF) to 'bbb+' (BIL), and 'a-' (KBC).

All these banks were, at some point and to various extents, supported by their respective sovereigns in the aftermath of the financial crisis. They have since undertaken significant restructuring plans, with businesses sold or run down.

Legacy portfolios are at varying stages of being cleaned up, but the process is substantially advanced in all cases. Restructuring has also resulted in more focused operations with revenue improvement and cost reduction targets at the forefront and achievements in line with or ahead of plan, resulting in various VR upgrades during the past two years. The current VRs mean that downgrade risk for the IDRs from the removal of state support is now limited to one notch for the four banks with sovereign support-driven IDRs.

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