July 5, 2017 / 11:35 AM / 5 months ago

Fitch Affirms BNPP Fortis and BGL BNPP at 'A+'; Outlook Stable

(The following statement was released by the rating agency) PARIS, July 05 (Fitch) Fitch Ratings has affirmed BNP Paribas Fortis SA/NV's (BNPPF) and its subsidiary BGL BNP Paribas's (BGL BNPP) Long-Term Issuer Default Ratings (IDRs) at 'A+' with Stable Outlooks and Short-Term IDRs at 'F1'. BNPPF's Viability Rating (VR) has been affirmed at 'a'. In addition, Fitch has assigned 'A+(dcr)' Derivative Counterparty Ratings (DCRs) to BNPPF and BGL BNPP as part of its roll-out of DCRs to significant derivative counterparties in western Europe and the US. DCRs are issuer ratings and express Fitch's view of banks' relative vulnerability to default under derivative contracts with third-party, non-government counterparties. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS IDRS, DCRS, SENIOR DEBT AND SUPPORT RATINGS BNPPF's and BGL BNPP's ratings are equalised with the ratings of the banks' majority or ultimate shareholder BNP Paribas S.A. (BNPP, A+/Stable/F1). BNPPF is almost wholly-owned by BNPP while BGL BNPP's capital is 50%-owned by BNPPF and 16% by BNPP with the remainder owned by the State of Luxembourg, a consequence of the Fortis Bank bail-out in 2008. The Support Ratings of '1' reflect an extremely high probability of support from BNPP, if needed. Fitch views BNPPF and BGL BNPP as core to BNPP's strategy and franchise. The two banks are highly integrated within the parent bank, both in terms of operations and management, and we believe that BNPP's reputation would suffer were one of these subsidiaries to default. We also believe BNPP would have sufficient resources to recapitalise them to a level acceptable to regulators on a timely basis as and when required. Retail banking is BNPP's largest business in revenue and allocated equity, and the strong retail franchises of BNPPF and BGL BNPP in Belgium and Luxembourg underpin their status as core BNPP subsidiaries. Both banks benefit from large customer deposit bases, which strengthen the parent's funding base. Belgium and Luxembourg are defined by BNPP as part of its 'domestic' markets, along with France and Italy. Operations and management are highly integrated and key management positions are shared among BNPP, BNPPF and BGL BNPP. To optimise capital and liquidity allocation within the group, BNPPF and BGL BNPP consolidate part of BNPP's specialised lending (asset finance) and its leasing operations, respectively, further supporting Fitch's opinion that both entities are integral parts of the group. DCRs have been assigned to BNPPF and BGL BNPP due to their significant derivative activities. The DCRs are at the same level as the Long-Term IDRs because under Belgian and Luxembourg legislations, derivative counterparties have no preferential status over other senior obligations in a resolution scenario. VR - BNPPF BNPPF's VR reflects the bank's retail and corporate banking-focused business model, which generates adequate profitability and contributes to an overall moderate risk profile. The rating is also underpinned by sound capitalisation and healthy funding and liquidity. The consolidation of BNPP's leasing operations and fast-growing Turkish operation are of higher risk than the fairly low-risk Belgian and Luxembourg retail and corporate businesses. However, we believe this is manageable. The quality of the loan book remains resilient and loan impairment charges should continue to represent a low-to-moderate percentage of average loans. Fitch expects the bank to maintain sound capitalisation. BNPPF's fully loaded Basel III common equity ratio was 12.5% at end-2016. Following the acquisition of Arval from its parent in late 2016, BNPPF did not pay a dividend for 2016; however, we expect dividend payment to resume. BNPPF's capital ratios should be converging to the parent's levels, which target a ratio of 12% by 2020. Funding and liquidity remains robust, due to a strong retail deposit base, especially in Belgium where the bank has a market share of around 25%. Customer deposits represent the largest source of funding. Reliance on wholesale funding is limited, and the bank has strong market access from being part of BNPP. It runs a large liquidity buffer in the form of cash and repo-able securities, with a significant amount of high-quality sovereign bonds. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES The rating of subordinated debt is notched down from BNPPF's Long-Term IDR, as opposed to the bank's VR, as Fitch believes parental support will neutralise BNPPF's non-performance risk in line with Fitch's rating criteria for such securities. The ratings of legacy upper Tier 2 debt issued by BNP Paribas Fortis Funding are rated at the same level as equivalent securities issued by BNPP. They are rated three notches below BNPP's VR, comprising one notch for loss severity and two for non-performance risk. Fitch has affirmed the rating of the CASHES hybrid capital (BE0933899800) at 'BBB-'. Fitch rates the CASHES hybrids under relevant insurance criteria (Insurance Rating Methodology (26 April 2017)) given that the cash coupon of the CASHES is linked to the declaration of a dividend by Ageas SA/NV (A/Stable), the ultimate holding company of the Ageas group, and in case a dividend is not declared the coupons will be settled non-cash via the issuance of new Ageas SA/NV shares using the alternative coupon satisfaction method (ACSM). Ageas SA/NV and BNPPF act as contractual co-obligors for these notes; however at the current rating level of the CASHES, there is no influence from BNPPF's ratings on these. The hybrids are rated four notches below Ageas SA/NV's IDR to reflect higher-than-average loss severity risk of these securities (two notches) as well as a higher risk of non-performance (an additional two notches). The rating of this instrument is the same as that of a hybrid instrument issued by Ageasfinlux, with similar terms and an ACSM dividend trigger (ISIN XS0147484074 and XS0147484314), and whose co-obligor is also Ageas SA/NV. SUBSIDIARY AND AFFILIATED COMPANY BNP Paribas Fortis Funding is a wholly owned financing subsidiary of BNPPF and its debt ratings are aligned with those of BNPPF. This is based on Fitch's expectation that BNPPF will honour the unconditional and irrevocable guaranteed provided to holders of the notes issued by BNP Paribas Fortis Funding under its common euro medium term note programme with BNPPF. RATING SENSITIVITIES IDRS, DCRS, SENIOR DEBT AND SUPPORT RATINGS The IDRs, DCRs and senior debt ratings of BNPPF and BGL BNPP are sensitive to a change in BNPP's IDRs. As such, the Stable Outlook on BNPPF's and BGL BNPP's Long-Term IDRs mirrors that on BNPP's. While not expected, the ratings would also be sensitive to a downgrade of the Support Rating arising from changes in Fitch's assessment of BNPP's propensity to provide timely support to BNPPF and BGL BNPP. VR - BNPPF BNPPF's VR would be sensitive to a material weakening in capitalisation, which could stem from a change in capital allocation within the BNPP group by up-streaming large amounts to the parent, or transferring a significant amount of assets to BNPPF. Worsening asset quality could also put pressure on the rating, particularly if capital would be materially affected. Upward pressure on BNPPF's VR is limited, but the VR could benefit from improved efficiency and higher capital ratios with liquidity maintained at high levels. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES BNPPF's subordinated debt ratings are broadly sensitive to the same considerations that might affect BNPPF's Long-Term IDR. The rating of the CASHES hybrid capital are sensitive to changes in AGEAS SA/NV's Long-Term IDR. SUBSIDIARY AND AFFILIATED COMPANY BNP Paribas Fortis Funding's ratings are sensitive to the same factors that might drive a change in BNPPF's ratings. The rating actions are as follows: BNP Paribas Fortis SA/NV Long-Term IDR affirmed at 'A+'; Outlook Stable Short-Term IDR affirmed at 'F1' Viability Rating affirmed at 'a' Support Rating affirmed at '1' Derivative Counterparty Rating assigned at 'A+(dcr)' Short-term debt affirmed at 'F1' Senior unsecured affirmed at 'A+' Subordinated debt affirmed at 'A' Hybrid capital (CASHES BE0933899800) affirmed at 'BBB-' BNP Paribas Fortis Funding Short-term debt affirmed at 'F1' Senior unsecured affirmed at 'A+' Market-linked notes affirmed at 'A+emr' Subordinated debt affirmed at 'A' Subordinated debt (upper Tier 2) affirmed at 'BBB+' BGL BNP Paribas Long-Term IDR affirmed at 'A+'; Outlook Stable Short-Term IDR affirmed at 'F1' Support Rating affirmed at '1' Derivative Counterparty Rating assigned at 'A+(dcr)' Short-term debt: affirmed at 'F1' Long-term senior debt: affirmed at 'A+' Contact: Primary Analyst Olivia Perney Guillot Senior Director +33 1 44 29 91 74 Fitch France SAS 40 rue de Monceau 75008 Paris Secondary Analyst for BNP Paribas Fortis SA/NV Bjorn Norrman Senior Director +44 20 3530 1330 Secondary Analyst for BGL BNP Paribas Francois-Xavier Deucher Director +33 1 44 29 9272 Committee Chairperson Cristina Torrella Senior Director +34 93 232 8405 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below