-- 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 and our Banking
Industry Country Risk Assessment on The Netherlands to '3' from '2'.
-- We are affirming our 'BBB-/A-3' long- and short-term counterparty
credit ratings on Netherlands-based NIBC Bank N.V. (NIBC).
-- We expect further strengthening in the bank's capitalization to offset
the moderately increased economic risks.
-- The negative outlook reflects our view of the risk that the
strengthening in the bank's capital position, as measured by our risk-adjusted
capital ratio, may be slower or more limited than we currently anticipate.
On Nov. 16, 2012, Standard & Poor's Ratings Services affirmed its 'BBB-/A-3'
counterparty credit ratings on Netherlands-based NIBC Bank N.V. (NIBC). The
outlook remains negative.
The rating affirmation reflects our expectation that further strengthening in
the bank's capital position should offset what we view as a moderate increase
in economic risk in The Netherlands and the wider eurozone. 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
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 NIBC, to
'bbb+' from 'a-'. Although NIBC is exposed to other countries, mainly Germany
and the U.K., our blended economic risk score for the bank--a key driver of
the anchor--remains largely driven by our assessment for The Netherlands,
where the bulk of NIBC's exposures resides. As a result, we have also lowered
NIBC's anchor in line with purely domestically-focused peers.
We expect the bank to continue actively strengthening its capital position. We
have therefore revised our assessment of its capital and earnings to "strong"
from "adequate", primarily based on our expectation that the bank's
risk-adjusted capital (RAC) ratio before adjustments, according to Standard &
Poor's measures, will sustainably reach 10.0%-10.5% by end-2014. We estimate
that the RAC ratio at end-September 2012--pro forma our lower economic risk
score and BICRA for The Netherlands--was about 9%. Our prospective RAC
assessment incorporates, among other things, the deleveraging trend followed
by the bank and our expectation of higher earnings retention and a cautious
Basel 3 minimum Core Tier 1 target.
We consider NIBC's business position to be "weak", as defined by our criteria,
primarily reflecting the bank's niche franchise, our view of potential
volatility in a few of its sectors, and modest overall market position. We
note the bank's long-standing expertise in its corporate niches, which in our
view helped it to defend its franchise through the recent downturn.
We view its risk position as "adequate", reflecting that we believe our RAC
framework adequately captures the risks NIBC faces. The bank has relatively
large exposures to sectors that we consider to be potentially volatile, such
as commercial real estate and shipping. Nevertheless, we observe that risks so
far appear to have been mitigated by the collateralized nature of most lending
activities, and sound sector knowledge and underwriting criteria. We note
that, compared with some domestic peers that have experienced a marked
increase in the cost of risk since mid-2011, NIBC's loss experience has been
We view NIBC's funding as "below average" and its liquidity as "adequate". Our
assessment of the bank's funding primarily takes into account the bank's
greater-than-average reliance on wholesale funding, illustrated by a high,
albeit rapidly decreasing, loan-to-customer-deposits ratio of about 220% at
The negative outlook reflects the possibility that we may lower the ratings on
NIBC if the strengthening in the bank's capital position, as measured by our
RAC ratio, proves slower or more limited than we currently anticipate.
We could lower the ratings if we no longer expect NIBC Holding's RAC ratio
before adjustments to exceed 10% in the next 18-24 months. This could be
triggered by a material deterioration in profitability, weaker earnings
retention, or unanticipated growth in exposures.
Conversely, a stabilization in the economic backdrop, combined with a RAC
ratio comfortably above 10%, could lead us to revise the outlook to stable. In
the longer term, a sustainable rebalancing of the bank's funding profile, with
decreasing reliance on wholesale funding and further evidence of stability in
the customer deposit base, could see us revise the bank's SACP upward.
Ratings Score Snapshot
Issuer Credit Rating BBB-/Negative/A-3
Business Position Weak (-2)
Capital and Earnings Strong (+1)
Risk Position Adequate (0)
Funding and Liquidity Below Average and Adequate (-1)
GRE Support 0
Group Support 0
Sovereign Support 0
Additional Factors 0
Related Criteria And Research
All articles listed below are available on RatingsDirect on the Global Credit
Portal, unless otherwise stated.
-- Economic Research: The Eurozone's New Recession--Confirmed, Sept. 25,
-- No Pain, No Gain: How The Housing Market Correction Is Affecting Dutch
Banks, June 27, 2012
-- Banks: 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
-- Various Rating Actions Taken On Dutch Banks Due To Increased Economic
Risks, Nov. 16, 2012
NIBC Bank N.V.
Counterparty Credit Rating BBB-/Negative/A-3
Certificate Of Deposit BBB-/A-3
NIBC Bank N.V.
Senior Unsecured BBB-
Junior Subordinated BB
Certificate Of Deposit A-3
Commercial Paper 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