(The following statement was released by the rating agency)
LONDON/PARIS, July 24 (Fitch) Fitch Ratings has affirmed
AMRO Bank N.V.'s (ABN AMRO) Long-term Issuer Default Rating
(IDR) and Support
Rating Floor (SRF) at 'A+'. The Outlook on the Long-term IDR is
Negative. At the
same time Fitch has upgraded ABN AMRO's Viability Rating (VR) to
'a' from 'a-'.
A full list of rating actions is available at the end of this
commentary. The rating actions follow a periodic review of major
The upgrade of ABN AMRO's VR 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 Holding and Fortis Bank
expects management to remain fully focused on maintaining a
sheet, and the continuing improvements in the bank's financial
metrics have been
incorporated into the 'a' VR.
KEY RATING DRIVERS - IDRS, SRF AND SENIOR DEBT
ABN AMRO's Long-term IDR is at its SRF, reflecting Fitch's
belief that the Dutch
State (AAA/Stable) would support the bank if required, given its
the domestic economy and financial system.
The Negative Outlook on the Long-term IDR reflect Fitch's view
there is a clear
intention ultimately to reduce implicit state support for
in the EU, as demonstrated by a series of legislative,
regulatory and policy
initiatives. Fitch expects the EU's Bank Recovery and Resolution
(BRRD) to be implemented into national legislation in 2H14 or in
also expects progress towards the Single Resolution Mechanism
(SRM) for eurozone
banks in this timeframe. In Fitch's view, these two developments
will dilute the
influence the Netherlands have in deciding how Dutch banks are
increase the likelihood of senior debt losses in its banks if
RATING SENSITIVITIES - IDRS, SRFs AND SENIOR DEBT
As ABN AMRO's IDRs, SRF and senior debt ratings are
support-driven, they are
sensitive to a change in Fitch's assumptions about the ability
or propensity of
the Dutch State to provide timely support to its domestic banks.
ABN AMRO's 'a'
VR means, however, that any support-driven downgrade of the
bank's Long-term IDR
and senior debt ratings would be limited to one notch, by which
ratings would be based only on its standalone strength.
The Support Rating and SRF are primarily sensitive to further
progress made in
implementing the BRRD and the SRM. The directive requires 'bail
in' of creditors
by 2016 before an insolvent bank can be recapitalised with state
functioning SRM and progress on making banks 'resolvable'
the wider financial system are areas of focus for eurozone
these are operational they will become an overriding rating
factor for any
support considerations, as the likelihood of the bank's senior
receiving full support from the sovereign if ever required,
despite its systemic
importance, will diminish substantially.
Fitch expects that the BRRD will be enacted into national
legislation in the
near term and progress made on establishing the SRM is looking
close to being
ready in the next one to two years. Fitch expects to then
downgrade ABN AMRO's
Support Rating to '5' and revise its SRF to 'No Floor'.
The Support Rating and SRF are also sensitive to changes in
about the sovereign's ability (as reflected by its ratings) to
KEY RATING DRIVERS - VR
ABN AMRO's VR reflects the bank's strong Dutch franchise,
international private banking, providing it with resilient
The VR also takes into account the bank's continued focus on
moderate risk profile, and expected gradual improvements of
ABN AMRO's profitability is in line with that of similarly rated
The bank has been affected by elevated loan impairment charges
(LICs) in recent
years, shaving 30% to 60% off pre-impairment operating profits
since 2010. As
the economy recovers, Fitch expects LICs will reduce in 2014 and
2015, and with
pre-impairment operating profit/equity of around 20%, improved
should be achievable, supporting the bank's internal capital
Cost-saving initiatives are also being implemented, which are
improve ABN AMRO's cost efficiency, which is somewhat higher
Limited asset growth and a low dividend payout ratio since 2010
ABN AMRO's efforts to build capital. Capitalisation compares
well with similarly
rated peers, particularly on a risk-weighted basis, with a fully
loaded Basel 3
common equity Tier 1 (CET1) ratio of 12.9% at end-March 2014.
ABN AMRO's fully
loaded Basel 3 leverage ratio was 3.6% at the same date, and the
incorporates expected gradual reduction in leverage. Further
capitalisation is likely to be driven by retained earnings, and
the issuance of additional Tier 1 instruments once their tax
treatment is voted
in by the Dutch parliament.
The quality of ABN AMRO's loan book remains resilient, despite
around 20% house
price correction in the Netherlands since the peak in 2008.
loans make up the majority of the portfolio, and impaired loans
manageable. Commercial real estate lending has been more
severely affected by
the Dutch recession, as evidenced in a materially higher
percentage, although this remains manageable for the bank.
ABN AMRO is reliant on wholesale markets for structural funding.
maintains a reasonable buffer of high-quality liquid assets to
RATING SENSITIVITIES - VR
The bank's VR incorporates a gradual improvement in asset
and leverage, and given the high rating, upside potential is
A material deterioration in the bank's earnings generation or
affecting its capital or access to/cost of wholesale funding
would likely result
in a downgrade of the VR.
KEY RATING DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT AND
As the bank's subordinated debt and hybrid securities are
notched down from its
VR, their respective ratings have been upgraded. The ratings are
sensitive to a
change in ABN AMRO's VR.
In accordance with Fitch's criteria 'Rating Bank Regulatory
Capital and Similar
Securities', subordinated (lower Tier 2) debt is rated one notch
AMRO's VR to reflect the above- average loss severity of this
type of debt.
Upper Tier 2 debt and Tier 1 securities are rated three and four
ABN AMRO's VR, respectively, to reflect higher loss severity
risk of these
securities relative to average recoveries (one and two notches
from the VR,
respectively) as well as high risk of non-performance (an
additional two notches
for each debt security).
KEY RATING DRIVERS AND SENSITIVITIES - SUSBIDIARY AND AFFILIATED
ABN AMRO Funding LLC is a US-based funding vehicle fully-owned
by ABN AMRO. The
rating of the US commercial paper (CP) debt securities issued by
the vehicle is
aligned with ABN AMRO's Short-term IDR, based on Fitch's view
that there is an
extremely high probability of support from ABN AMRO if required.
This view is
underpinned by ABN AMRO's guarantees on the securities issued by
The rating of the US CP debt is therefore sensitive to changes
in ABN AMRO's
The rating actions are as follows:
Long-term IDR: affirmed at 'A+'; Outlook Negative
Short-term IDR: affirmed at 'F1+'
Viability Rating: upgraded to 'a' from 'a-'
Support Rating: affirmed at '1'
Support Rating Floor: affirmed at 'A+'
Commercial paper: affirmed at 'F1+'
Long-term senior unsecured notes: affirmed at 'A+'
Short-term senior unsecured notes: affirmed at 'F1+'
Subordinated debt: upgraded to 'A-' from 'BBB+'
Non-innovative Tier 1 subordinated debt (XS0246487457): upgraded
to 'BBB-' from
Upper Tier 2 subordinated debt (XS0244754254): upgraded to 'BBB'
ABN AMRO Funding USA LLC
Short-term senior unsecured notes: affirmed at 'F1+'
+44 20 3530 1326
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
+33 144 29 91 26
Maria Jose Lockerbie
+44 20 3530 1083
Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153,
email@example.com; Peter Fitzpatrick, London, Tel:
+44 20 3530
1103, Email: firstname.lastname@example.org.
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Global Financial Institutions Rating
Criteria', dated 31
January 2014' and 'Assessing and Rating Bank Subordinated and
Securities', dated 31 January 2014, are available at
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Assessing and Rating Bank Subordinated and Hybrid Securities
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
here. IN ADDITION,
ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
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
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH