Dec 4 - Fitch Ratings has maintained NCG Banco, S.A.'s (NCG) Long-term
Issuer Default Rating (IDR) of 'BB+', Support Rating of '3' and Support Rating
Floor (SRF) of 'BB+' on Rating Watch Negative (RWN) and downgraded its Viability
Rating (VR) to 'f' from 'c'. A full list of rating actions is at the end of this
rating action commentary.
RATING ACTION RATIONALE
The downgrade of the VR reflects the recent European Commission approval of the
restructuring plan for NCG which calls for the injection of EUR5.4bn in capital
by Spain's Fund for Orderly Bank Restructuring (FROB) previous to burden sharing
by subordinated debt and preference shareholders is undertaken and real estate
assets are transferred to an asset management company (Sareb). In Fitch's
opinion, NCG has failed, and would have defaulted had it not received
NCG's IDRs and Support Ratings were placed on RWN on 10 October 2012, to reflect
the fact that there was a risk that alternative scenarios under orderly
resolution by which some form of default, or 'restricted default', under Fitch's
definition and criteria, could be undertaken. As the bank is undergoing
restructuring, this is no longer the case.
However, the RWN has been maintained on the Long-term IDR, the Support Rating
and the SRF to reflect the fact that NCG is being forced to reduce its size
significantly as a condition to receiving capital assistance and will become
less systemically important. Also, Fitch expects the propensity of the state to
support an entity that has already received substantial state assistance to
diminish in the future. In addition to the EUR5.4bn expected capital injection,
NCG has already received EUR3.6bn in funds from the FROB.
RATING DRIVERS AND SENSITIVITIES - IDRS, SUPPORT RATING, SRF
NCG's Long-term IDR is at the SRF. On the downside, NCG's IDRs, Support Rating
and SRF are sensitive to a downgrade of the Spanish sovereign rating or to any
change in Fitch's assumptions around the strategic importance of this
institution as well as the propensity of the state to support the bank in the
Fitch expects to resolve the RWNs once it has been able to meet with the bank's
management and reassess the bank's credit profile and its systemic importance
following restructuring and recapitalisation.
RATING DRIVERS AND SENSITIVITIES - VR
Once capital is injected into NCG, the agency will reassess the banks VR and
upgrade it to a level commensurate with its post-support credit and financial
profile. The initial scope for this upgrade is likely to be constrained by weak
economic conditions and still close relationship between sovereign and bank
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
NCG's subordinated debt and preference shares have been affirmed at 'C' as these
form part of the burden sharing of losses after capital injection as per the
Memorandum of Understanding signed between the Spain and the Eurogroup on July
The rating actions are as follows:
Long-term IDR: 'BB+', maintained on RWN
Short-term IDR: affirmed at 'B', removed from RWN
Viability Rating: downgraded to 'f' from 'c'
Support Rating: '3' maintained on RWN
Support Rating Floor: 'BB+', maintained on RWN
Senior unsecured debt long-term rating: 'BB+', maintained on RWN
Senior unsecured debt short-term rating and commercial paper: affirmed at 'B'
removed from RWN
Subordinated lower tier 2 debt: affirmed at 'C''
Subordinated upper tier 2 debt (ISIN: ES0214958045): affirmed at 'C'
Preferred stock: affirmed at 'C'
State-guaranteed debt: affirmed at 'BBB'
Additional information is available on www.fitchratings.com.
The ratings above were solicited by, or on behalf of, the issuer, and therefore,
Fitch has been compensated for the provision of the ratings.
Applicable criteria 'Global Financial Institutions Rating Criteria' dated 15
August 2012, is available on www.fitchratings.com.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria