(The following statement was released by the rating agency)
Oct 22 - Fitch Ratings has maintained Unicaja Banco S.A.U.'s (Unicaja) 'BBB-'
Long-term Issuer Default Rating (IDR), 'F3' Short-term IDR and 'bbb-' Viability Rating (VR) on
Rating Watch Negative (RWN). At the same time the agency has affirmed Unicaja's Support Rating
at '3' and Support Rating Floor (SRF) at 'BB+'.
RATING ACTION RATIONALE AND DRIVERS - VR and IDR
The maintained RWN reflects that Unicaja is still in in merger talks with a much
weaker financial institution that has high exposure to the Spanish real estate
sector, Banco Caja de Espana de Inversiones de Salamanca y Soria (Banco CEISS),
and that the final terms are yet to be agreed.
Unicaja's Long-term IDR is based on its intrinsic financial strength as
reflected by its VR. Unicaja's VR is based on its solid regional franchise,
robust capital base with a Fitch core capital ratio of 12.9%, acceptable
operating profitability, good coverage of real estate exposures including
foreclosed assets, real estate exposure that is lower than its peers and
proactive management. The ratings also consider the recessionary environment in
Spain and the collapse of the property sector.
Unicaja's risk profile from lending activities is moderate and well diversified,
with 60% of lending being to individuals (largely mortgages). Asset quality has
deteriorated amidst Spain's economic and property market downturn
(impaired/total loans ratio of 6.9%, and 10.7% with foreclosed assets). Impaired
loans are 49% covered with loan impairment allowances, the coverage increases to
59% for impaired real estate exposures. Unicaja's, real estate exposure,
although significant at 18% of aggregate lending and foreclosed assets. is lower
than its peers.
RATING SENSITIVITIES - VR and IDR
Unicaja's VR and IDRs are sensitive to an even more protracted and deeper
recessionary environment in Spain than currently assumed, which could further
affect profitability and asset quality, or an unanticipated liquidity shock.
The RWN on Unicaja's Long and Short-term IDRs and VR reflects the integration
risks, the higher risk profile of Banco CEISS with larger real estate exposures
and the relatively large size of the bank with EUR42bn in assets at end-2011.
Fitch expects to resolve the RWN on completion of the merger, which could take
place in more than six months, or if the merger plans are abandoned.
RATING SENSITIVITIES: SUPPORT RATING AND SRF
These ratings are sensitive to any change in Fitch's assumptions around the
level of support available to the bank . Fitch assumes a moderate probability of
support for Unicaja if needed as reflected in its '3' Support Rating and 'BB+'
SRF. In the context of the current crisis Fitch's support ratings assume
continued support for many eurozone banks in the near term, and actions to date
by policymakers and regulators have proven to be consistent with that view.
The Support Rating and SRF are sensitive to a potential downgrade of the Spanish
sovereign ratings or to a change in Fitch's assumptions regarding the
authorities' propensity to support Unicaja.