March 16, 2017 / 6:01 PM / 6 months ago

Fitch Rates Caixa Geral's AT1 Notes 'B-(EXP)'

(The following statement was released by the rating agency) LONDON/BARCELONA, March 16 (Fitch) Fitch Ratings has assigned Caixa Geral de Depositos, S.A.'s (CGD) planned additional Tier 1 (AT1) capital notes an expected rating of 'B-(EXP)'. The assignment of the final rating is contingent upon final documents conforming to the information already received. KEY RATING DRIVERS The notes are CRD IV-compliant perpetual, deeply subordinated, fixed-rate reset AT1 debt securities. The notes have fully discretionary interest payments and are subject to partial write-down if the consolidated or unconsolidated common equity Tier 1 (CET1) ratio of CGD falls below 5.125%. The rating assigned to the securities is three notches below CGD's 'bb-' Viability Rating (VR), in accordance with Fitch's criteria for assigning ratings to hybrid instruments. The notching reflects higher expected loss severity relative to senior unsecured creditors and higher non-performance risk. Non-performance risk reflects the full discretionary coupon payment. CGD has estimated its distributable reserves at EUR1.9 billion after the share capital reduction of 4 January 2017. Fitch expects the non-payment of interest on this instrument will occur before it breaches the notes' 5.125% CET1 trigger level, when CGD's capital ratio approaches its Supervisory Review and Evaluation Process requirement set at 8.25% for 2017. CGD's pro-forma (including the expected EUR2.5 billion capital increase to be completed by end-March) phase-in CET1 ratio was 12% on a consolidated and 13.7% on an unconsolidated basis, which provide it with a buffer from the equity conversion trigger level. The principal write-down can be reinstated and written up at full discretion of the issuer if a positive net income (unconsolidated or consolidated) is recorded. RATING SENSITIVITIES The AT1 notes' expected rating is primarily sensitive to changes in CGD's VR. The rating is also sensitive to changes in their notching from CGD's VR, which could arise if Fitch changes its assessment of the probability of their non-performance relative to the risk captured in the VR. This may reflect a change in capital management in the group or an unexpected shift in regulatory buffer requirements, for example. Under Fitch's criteria, a one-notch upgrade of the AT1 instrument would be conditional upon a two-notch upgrade of CGD's VR. Contact: Primary Analyst Roger Turro Director +34 93 323 8406 Fitch Ratings Espana, S.A.U. Av. Diagonal, 601, 2nd Floor 08028 Barcelona Secondary Analyst Josu Fabo, CFA Director +34 93 494 3464 Committee Chairperson Olivia Perney Guillot Senior Director +33 1 44 29 91 74 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com; Pilar Perez, Barcelona, Tel: +34 93 323 8414, Email: pilar.perez@fitchratings.com. 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