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Fitch Affirms Instituto de Credito Oficial at 'BBB', Outlook Negative
June 7, 2013 / 1:56 PM / 4 years ago

Fitch Affirms Instituto de Credito Oficial at 'BBB', Outlook Negative

(The following statement was released by the rating agency) BARCELONA/MILAN/LONDON, June 07 (Fitch) Fitch Ratings has affirmed Instituto de Credito Oficial's (ICO) Long-term Issuer Default Rating (IDR) at 'BBB', Short-term IDR at 'F2', Support Rating at '2' and Support Rating Floor at 'BBB'. The Outlook on ICO's Long-Term IDR is Negative. At the same time, Fitch has affirmed ICO's long-term programme ratings and long-term senior debt issues at 'BBB', market linked securities at 'BBBemr' and short-term programme ratings and commercial paper issues at 'F2'. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS - IDRS, SR, SRF AND SENIOR DEBT Instituto de Credito Oficial's (ICO) IDRs and senior debt ratings are based on support from its 100% shareholder, the Kingdom of Spain (BBB/Negative/F2). The rating equalisation between ICO and Spain reflects the explicit, irrevocable, unconditional and direct guarantee provided by the Spanish state on all ICO's financial debt, with no time limit. ICO's ratings also factor in the strong control and supervision links between ICO and the state, the credit institution's high strategic importance to the Spanish government and Fitch's expectations of continued capital support from the latter. ICO is a state credit institution providing medium and longer-term lending to the private and public sector to foster economic and social development in Spain. Lending is driven by the Spanish government's policies. The CEO is appointed by the government, which also sets annual debt limits for ICO and exerts public control over it. In addition to its ordinary lending activity, ICO supported autonomous communities to refinance their debt maturities in H112 granting EUR5.3bn in ad-hoc loans. It also contributed EUR6.3bn to a special purpose fund (EUR27bn) aimed at paying arrears of local governments. This reinforces Fitch's assessment of ICO's very high strategic importance to the state, which is also underpinned by Fitch's opinion that no other bank could currently replace ICO's role as the state's financial arm. Fitch believes the Spanish government will continue providing capital support above the current legislative commitment. Although according to Act 42/2006 the Spanish government is committed to keep ICO's Tier 1 ratio above 9.5%, the ratio was higher at 15.7% at end March 2013, up from 12.3% in 2011. This followed a EUR520m capital injection in 2012. Fitch expects ICO's capital to remain good quality in 2013-2014, comprising only equity and retained earnings. The Negative Outlook reflects the Negative Outlook on Spain's Long-term IDRs. 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 the explicit guarantee on ICO's debt. ICO's ratings and Outlook will therefore move in tandem with those of the Spanish sovereign. ICO's IDRs are also sensitive to changes in the bank's strategic importance to the state, which Fitch currently does not expect. The rating actions are as follows: Long-term IDR affirmed at 'BBB'; Outlook Negative Short-term IDR affirmed at 'F2' Support Rating affirmed at '2' Support Rating Floor affirmed at 'BBB' Long-term programme and long-term senior debt affirmed at 'BBB' Market-linked securities affirmed at 'BBBemr' Short-term programme and commercial paper affirmed at 'F2' Contact: Primary Analyst Roger Turro Director +34 93 323 8406 Fitch Ratings Espana, S.A.U. Paseo de Gracia 85, 7th Floor 08008 Barcellona Secondary Analyst Erwin Van Lumich Managing Director +34 93 323 8403 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 on www.fitchratings.com Applicable criteria 'Global Financial Institutions Rating Criteria' dated 15 August 2012, are available on 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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