-- In our view, Dutch banks are exposed to the potential of a more
protracted downturn in The Netherlands and the wider eurozone.
-- We are therefore revising our economic risk score for The Netherlands
and our Banking Industry Country Risk Assessment to '3' from '2'.
-- SNS Bank's asset quality track record to date has been particularly
sensitive to this environment, making the group's repayment of government
capital securities more onerous.
-- As a result, we are lowering by one notch our long-term ratings on
parent SNS REAAL N.V. and SNS Bank N.V.
-- We are also lowering by one notch the financial strength and issuer
credit ratings on the group's insurance subsidiaries SRLEV N.V. and REAAL
Schadeverzekeringen N.V. to 'BBB' from 'BBB+'. The insurance ratings remain on
CreditWatch developing due to the uncertainty of their position within the
group under the group's strategic review.
-- The negative outlook on SNS REAAL and SNS Bank is based on our view
that the possible sale of some of the group's business activities could weaken
its overall business profile.
On Nov. 16, 2012, Standard & Poor's Ratings Services lowered to 'BBB-' from
'BBB' its long-term counterparty credit ratings on Netherlands-based
bancassurance group SNS REAAL N.V. (SNS REAAL, or the group) and its
core insurance holding company REAAL Verzekeringen N.V.
We also lowered our long-term ratings on SNS REAAL's core operating
subsidiary, SNS Bank N.V., and insurance operations SRLEV N.V. and REAAL
Schadeverzekeringen N.V., to 'BBB' from 'BBB+'. We lowered our short-term
rating on SNS Bank to 'A-3' from 'A-2'.
We lowered by two notches the non-deferrable and junior subordinated debt
ratings of SNS REAAL and SNS Bank. The junior subordinated debt ratings remain
on CreditWatch negative, where they were placed on July 20, 2012, and we have
placed the non-deferrable subordinated debt ratings on CreditWatch negative.
We lowered by one notch the subordinated debt ratings of SRLEV's issues. The
insurance operations and their issues remain on CreditWatch developing, where
they were placed on July 20, 2012. The outlook on all other entities is
The downgrade of SNS REAAL and the group's core entities reflects our view of
the effect of moderately higher economic risks on SNS Bank's stand-alone
credit profile (SACP). This follows our review of the Banking Industry Country
Risk Assessment (BICRA) on The Netherlands. Against the backdrop of a
potentially more protracted downturn in The Netherlands and wider eurozone, we
have revised our economic risk score for The Netherlands and our BICRA
assessment to '3' from '2'. (For more information, see "Various Rating Actions
Taken On Dutch Banks Due To Increased Economic Risks," published Nov. 16, 2012
on RatingsDirect on the Global Credit Portal).
The rating actions also take into account the strategic review the group is
currently undertaking, and our view of some erosion in the bank's franchise
over the past two years. We believe that the group may be considering options
such as the sale of parts of or all of its insurance operations, which we view
as having a stronger credit profile compared with the bank. We understand that
the group is also considering various measures to enhance its capital base.
The strategic review is underpinned by the bank's initial commitment to
repurchase, by end-2013, the capital securities received from the Dutch
government in November 2008. As we said earlier this year, we believe that the
current economic backdrop makes the commitment to repurchase the government
securities a more onerous undertaking, despite the group's rapid progress
against its initial capital release program.
The ratings on SNS REAAL are based on our view of the combined strength of its
banking and insurance operations. They are underpinned, to some extent, by our
view of the stronger profile of the insurance operations compared to the bank.
The group's life and non-life operations, SRLEV N.V. and REAAL
Schadeverzekeringen N.V., currently have a SACP of 'a', compared with the
bank's SACP of 'bb+'. We believe that the disposal of some insurance assets
could lead to a weakening of the overall group's franchise.
We have revised our assessment of systemwide risks that Dutch banks are
exposed to, which has led us to lower our anchor--or starting point for our
ratings--for commercial banks operating in The Netherlands, including SNS
Bank, to 'bbb+' from 'a-'. In our view, SNS Bank's performance since mid-2011
somewhat reflects the weaker domestic environment. We have also revised our
assessment of the bank's business position to "moderate" from "adequate".
While its deposit franchise remains sound, we note that the bank's lending
market shares, including in its core retail business, have decreased. As a
result, we have lowered our SACP on the bank to 'bb+' from 'bbb'.
Under our criteria, the issuer credit rating on SNS Bank benefits from two
notches of group support above its SACP, underpinned by our view of the
relatively stronger profile of its sister insurance companies. As a result of
this group support, we do not factor any uplift for potential extraordinary
government support into the ratings on SNS Bank. Nevertheless, we consider
that the bank has "moderate" systemic importance in The Netherlands, a country
that we consider to be "supportive" of its banking system, as our criteria
define these terms. As a result, the rating on the bank--if we were to exclude
any group support--could still benefit from a one-notch uplift above its SACP
under our government support approach.
We rate SNS REAAL one notch below the operating entities in line with our
criteria for rating nonoperating holding companies.
The negative outlook on SNS REAAL and SNS Bank primarily reflects our view
that the group's overall franchise may somewhat erode over the next two years.
Among other things, it takes into consideration our understanding that SNS
REAAL may consider selling parts of the business as a result of its strategic
We could lower the ratings in the event of the performance of the insurance
operations deteriorating or a sale by the group of a material portion of these
operations. A negative rating action could also arise from a marked
deterioration in the group's capital or liquidity positions.
We would likely revise our outlook to stable if we saw:
-- A reduction in the bank's impairment charges to a level that we
consider to be more supportive of meaningful capital generation by the bank;
-- An extension of the deadline for the repayment of the government
capital securities without materially adverse conditions being imposed by the
Dutch or European authorities; or
-- Other evidence of the group's ability to meet its capital repayment
commitment without materially eroding its franchise.
CreditWatch: Subordinated Instruments
We expect to resolve the CreditWatch placements on the ratings on SNS REAAL
and SNS Bank's subordinated instruments once we have more clarity as to the
likely outcome of the strategic review and its potential impact on the risk
profiles of these instruments, possibly by first-quarter 2013.
Resolution of the CreditWatch could result in a downgrade of the instruments
by at least one notch. If we were to include uplift for government, rather
than group, support in the issuer credit ratings on both entities--for
example, if the group were to sell a large part or all of its insurance
operations--we would not factor any government support into the ratings on the
hybrids. If the group were granted an extension of the deadline for the
repayment of the government capital securities, we would also assess whether
possible European Commission-imposed conditions might affect these instruments.
CreditWatch: Insurance Operations
In July 2012 the group mooted that, among other options also being considered
as part of a strategic review, some or all of the insurance operations could
be sold. We therefore placed the insurance ratings on CreditWatch with
developing implications. We now understand that the strategic review will
possibly not be completed until early 2013. We expect to resolve our
CreditWatch when the review is concluded and the group's strategy becomes
Should the insurance operations be sold as a unit, their SACPs would likely
remain unchanged. The ratings would depend on the identity of the new owner
and the financing structure of the new group. Given that the SACPs are higher
than the ratings, the insurance operations could potentially be upgraded.
However, we do not consider this to be sufficiently likely to merit a
CreditWatch positive placement.
A negative rating action on SRLEV and REAAL Schadeverzekeringen could also
follow their partial sale, because their ratings would then depend on their
SACPs following such a transaction, as well as their strategic role within SNS
REAAL or a new owner group. We could also lower the ratings if the credit
profile of the SNS REAAL group were to weaken--if the insurance operations
remained within the group. Alternatively, parts of the insurance operations
could be sold separately. Any rating would then depend on how they were split.
Related Criteria And Research
-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
-- Group Rating Methodology And Assumptions, Nov. 9, 2011
-- Banking Industry Country Risk Assessment Methodology And Assumptions,
Nov. 9, 2011
-- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011
-- Bank Capital Methodology and Assumptions, Dec. 6, 2010
-- Interactive Ratings Methodology, April 22, 2009
-- Principles Of Credit Ratings, Feb. 16, 2011
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- Holding Company Analysis, June 11, 2009
-- Group Methodology, April 22, 2011
-- Various Rating Actions Taken On Dutch Banks Due To Increased Economic
Risks, Nov. 16, 2012
SNS Bank N.V.
Counterparty Credit Rating BBB/Negative/A-3 BBB+/Negative/A-2
Certificate Of Deposit
Foreign Currency BBB/A-3 BBB+/A-2
Local Currency BBB/A-3 BBB+/A-2
SNS REAAL N.V.
Senior Unsecured BBB- BBB
Junior Subordinated BB-/Watch Neg BB+/Watch Neg
SNS Bank N.V.
Senior Unsecured BBB BBB+
Junior Subordinated BB/Watch Neg BBB-/Watch Neg
Commercial Paper A-3 A-2
REAAL Schadeverzekeringen N.V.
Counterparty Credit Rating
Local Currency BBB/Watch Dev/-- BBB+/Watch Dev/--
Financial Strength Rating
Local Currency BBB/Watch Dev/-- BBB+/Watch Dev/--
REAAL Verzekeringen N.V.
Counterparty Credit Rating BBB-/Watch Dev/-- BBB/Watch Dev/--
Subordinated* BB+/Watch Dev BBB-/Watch Dev
Junior Subordinated* BB+/Watch Dev BBB-/Watch Dev
*Guaranteed by SNS REAAL N.V.
Downgraded; CreditWatch/Outlook Action
SNS REAAL N.V.
Subordinated BB/Watch Neg BBB-
SNS Bank N.V.
Subordinated BB+/Watch Neg BBB
Downgraded; Ratings Affirmed
SNS REAAL N.V.
Counterparty Credit Rating BBB-/Negative/A-3 BBB/Negative/A-3
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left