(The following statement was released by the rating agency)
Nov 23 -
-- We now see higher economic risk for banks operating in Spain following the rapid
deterioration of the sovereign's creditworthiness, which has been reflected in our rating
actions on Spain, including our recent two-notch downgrade.
-- In our view Spanish banks face increased credit risk as Spain's weakening economy, public
sector cuts, austerity measures, and high unemployment will likely hamper the creditworthiness
and resilience of public and private sector borrowers.
-- In light of the higher credit risk in the economy, we believe Bankinter's capital
position has deteriorated according to our methodology. Additionally, we see imbalances in its
funding profile, which in our view are counterbalanced by the funding support it receives from
the European Central Bank.
-- We are lowering our long-term rating on Bankinter to 'BB' from 'BB+' and
removing it from Credit Watch negative. We are affirming the 'B' short-term rating.
-- We are also lowering our issue ratings on Bankinter's preferred stock to 'CCC+' from 'B',
and removing them from CreditWatch negative.
-- The negative outlook reflects our view that the difficult economic and operating
conditions in Spain could lead to a deterioration of Bankinter's stand-alone credit profile.
On Nov. 23, 2012, Standard & Poor's Ratings Services lowered to 'BB' from 'BB+' its
long-term counterparty credit rating on Spain's Bankinter S.A. (Bankinter) and removed it from
CreditWatch with negative implications, where we placed it on Oct. 16, 2012. At the same time,
we affirmed our 'B' short-term counterparty credit rating on the bank. The outlook is negative.
We also lowered our issue ratings on Bankinter's dated subordinated debt to 'B' from 'BB-',
and on its preferred stock to 'CCC+' from 'B'. We removed these ratings from CreditWatch
negative, where we placed them on the same date.
The downgrade follows our review of the wider implications for economic risk and industry
risk in the Spanish banking sector of our two-notch downgrade of the Kingdom of Spain
(BBB-/Negative/A-3) on Oct. 10, 2012. We believe banks operating in Spain face higher credit
risk, not only from their increasing exposure to a weaker public sector, but also owing to a
riskier, less resilient private sector, which will suffer the effects of the economic recession,
austerity measures, and high unemployment.
To reflect the higher credit risk we now see in the Spanish market we lowered our Banking
Industry Country Risk Assessment (BICRA) for Spain to group '6' from '5' and revised our
economic risk score, a component of the BICRA, to '7' from '6'(see "Various Rating Actions On
Spanish Banks Due To Rising Economic Risks," published Nov. 23, 2012).
Consequently, we also revised down our anchor, the starting point for our ratings on
financial institutions operating primarily in Spain, to 'bb+' from 'bbb-'.
In light of the higher credit risk, we believe Bankinter's capital position has
deteriorated, according to our methodology. We now expect that Bankinter's risk-adjusted capital
(RAC) ratio, before diversification adjustments, will not reach 5% at the end of 2013. As a
result, we have lowered our assessment of the bank's capital and earnings to "weak" from
We have also reviewed the funding and liquidity of Spanish banks, aiming to differentiate
our assessments of these factors for the banks, in line with the approach communicated earlier
this year (see "ECB's Funding "Bazooka" Gives Eurozone Banks Time To Reshape Their Business
Models And Balance Sheets," published on Feb. 29, 2012, and "CreditWatch Actions On Four Spanish
Banks On Potential Implications Of State Recapitalization," published on Aug. 7, 2012).
The review resulted in the lowering of our assessment of Bankinter's funding to "below average"
from "average," while we have maintained our view on liquidity as "adequate."
Our revised assessment of Bankinter's funding assessment reflects our view that,
notwithstanding the growing weight of retail financing in the past few years, the bank's overall
funding structure remains more imbalanced than the average of its rated domestic peers. This is
partly due to what we view as its higher dependence on capital market financing. We have also
taken into account that Bankinter maintains what we view as a higher-than-average use of
European Central Bank (ECB) funding, which makes it vulnerable to the difficulties of reducing
use of these funds, depending on deleveraging trends and funding conditions in both domestic and
Our revised assessments of the bank's capital and earnings and funding profile led us to
lower our assessment of Bankinter's stand-alone credit profile to 'bb-' from 'bb+'. However, we
only lowered the long-term rating by one notch, rather than two. This is because we now
incorporate one notch of short-term support in the ratings to reflect our view that the ongoing
access to ECB funding facilities, particularly the long-term refinancing operations (LTROs),
creates time for Bankinter to continue rebalancing its funding profile to a more sustainable
We have not changed our assessment of other factors of Bankinter's SACP and therefore
maintain our view of its "moderate" business position, and "strong" risk position, as our
criteria define the terms.
The downgrade of Bankinter's preferred stock and subordinated debt was triggered by the
lowering of the bank's SACP.
The negative outlook reflects the possibility that we could downgrade Bankinter if we
lowered our assessment of its SACP. This could occur if the operating environment in Spain
became more difficult than we currently anticipate. We could also lower Bankinter's SACP if we
saw that the bank was unable to rebalance its funding structure and significantly reduce its
reliance on ECB funding so that, by the time LTROs expire, we anticipated that it would likely
maintain a comparatively high reliance on short-term central bank funding.
We might consider taking a positive rating action if economic and operating conditions in
Spain improved or if the bank continue to transform and strengthen its business model. If the
bank manages to successfully reduce its reliance on central bank financing, while not
accumulating other imbalances on its funding profile, all other things being equal, the ratings
on the bank would likely remain unchanged. This is because we would likely improve our
assessment of the bank's funding to "average" and remove the one-notch uplift for short-term
Ratings Score Snapshot
Issuer Credit Rating BB/Negative/B BB+/Watch Neg/B
SACP bb- bb+
Anchor bb+ bbb-
Business Position Moderate (-1) Moderate (-1)
Capital and Earnings Weak (-1) Moderate (-1)
Risk Position Strong (+1) Strong (+1)
Funding and Liquidity Below Average Average
and Adequate (-1) and Adequate (0)
Support +1 0
GRE Support 0 0
Group Support 0 0
Sovereign Support 0 0
Short-Term Support +1 0
Additional Factors 0 0
Related Criteria And Research
-- Various Rating Actions On Spanish Banks Due To Rising Economic Risks, Nov. 23, 2012
-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
-- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
-- Group Rating Methodology And Assumptions, Nov. 9, 2011
-- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions, June
-- Bank Capital Methodology And Assumptions, Dec. 6, 2010
-- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
Downgraded; CreditWatch/Outlook Action; Ratings Affirmed
Counterparty Credit Rating BB/Negative/B BB+/Watch Neg/B
Certificate Of Deposit BB/B BB+/Watch Neg/B
Downgraded; CreditWatch/Outlook Action
Senior Unsecured BB BB+/Watch Neg
Subordinated B BB-/Watch Neg
Bankinter Emisiones, S.A. Unipersonal
Preferred Stock* CCC+ B/Watch Neg
Commercial Paper B
Bankinter Sociedad de Financiacion, S.A
Commercial Paper* B
*Guaranteed by Bankinter S.A.
NB. This list does not include all ratings affected.