Jun
17
Buenos Aires City, June 16, 2015 — Moody’s Latin America Agente de Calificación de Riesgo S.A.
(MLA) has today concluded its review on Banco Cetelem Argentina’s
(Cetelem) adjusted baseline credit assessment. MLA lowered the
adjusted BCA of Cetelem to ba1 from a3. However, the bank’s
B1 debt and deposit ratings were affirmed. Moody’s initiated
the review on 17 March 2015 (see press release at http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320912),
following the publication of Moody’s new bank rating methodology.
Moody’s also today affirmed the caa1 baseline credit assessments,
deposits and senior unsecured debts ratings of Banco Macro (Macro),
Banco de Galicia y Buenos Aires (Galicia), Banco Supervielle (Supervielle),
and Banco de Servicios y Transacciones (BST). In addition,
Moody’s affirmed Macro, Galicia, and Supervielle’s
Baa1.ar Argentine national scale ratings (NSRs), and BST’s
Baa3.ar NSR. The affirmations consider that the banks’
financial metrics remain sound despite deteriorating economic conditions.
Moody’s also withdrew the rating outlook on the subordinated debt rating
of BST for its own business reasons. Please refer to Moody’s Investors
Service’s Policy for Withdrawal of Credit Ratings, available on
its website, www.moodys.com. Outlooks,
which provide an opinion on the likely rating direction over the medium
term, are now assigned only to long-term deposit and senior
debt ratings.
All the long-term deposit and senior debt ratings carry negative
outlooks in line with the negative outlook on Argentina’s Caa1 sovereign
bond rating, which constrains the banks’ ratings given their
lack of geographic diversification and significant exposure to Central
Bank notes. The government’s negative outlook reflects that
the deteriorating operating environment will negatively affect the Argentine
financial entities’ business prospects, asset quality and earnings
generation amid continued economic deceleration and high inflation.
The banks could also face downward rating pressure if they suffer a substantial
deterioration in their asset quality or capitalization metrics due to
the current economic slowdown.
Lastly, Moody’s assigned a counterparty risk assessment to each
of the 25 rated Argentine banks.
Please click on the following link to access the full list of affected
credit ratings. This list is an integral part of this press release
and identifies each affected issuer: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_182415
RATINGS RATIONALE
The new banking methodology includes a number of elements that Moody’s
has developed to help accurately predict bank failures and determine how
each creditor class is likely to be treated when a bank fails and enters
resolution. These new elements capture insights gained from the
financial crisis and the fundamental shift in the banking industry and
its regulation.
In light of the new methodology, Moody’s rating actions generally
reflect the following considerations: (1) the “Very Weak” Macro
Profile of Argentina and (2) the banks’ core financial ratios.
1) Argentina’s “Very Weak” Macro Profile
While many Argentinean banks continue to report strong financial results,
their ratings are constrained by Argentina’s very weak macro profile,
which highlights the fragility of the banks’ performance.
Argentina’s (Caa1 negative) economic environment has deteriorated
significantly over the past year, plagued by high inflation,
steady depreciation of the exchange rate and an unorthodox mix of government
policies that have deterred private investment. The country has
been in an economic recession since the first quarter of 2014, and
the government’s default on its sovereign debt in July 2014 has
further weighed on investor and consumer confidence. Moody’s
expects GDP will contract by 1% in 2015 after expanding only 0.5%
in 2014, even as inflation remains among the highest in the rated
universe, leading to a rise in unemployment and a decline in real
household wages. Continued capital outflows will trigger further
depreciation of the Argentine peso and lead to additional declines in
the central bank’s international reserves.
2) Banks’ Core Financial Ratios
Argentine banks’ BCAs (median caa1) consider the challenges banks
face in light of the deteriorating operating environment and high inflation.
While reported earnings remain high, after adjusting for inflation
they are much narrower. In many cases they are insufficient to
sustain currently adequate capitalization levels considering the rapid
expansion of the loan book, notwithstanding a recent deceleration.
Non-performing loan ratios system-wide remain relatively
low but they are expected to begin rising as the economy continues to
deteriorate and loan growth slows, revealing the problems created
by recent years’ rapid expansion of the loan portfolio, despite
a focus on lending in low-risk asset classes such as the corporate
and payroll segments. While deposits have been relatively stable,
this is because large Argentine institutional depositors are unable to
move money abroad owing to strict capital controls.
BANCO CETELEM ARGENTINA’S ADJUSTED BCA LOWERED; DEPOSITS AND SENIOR
UNSECURED DEBT RATINGS AFFIRMED WITH NEGATIVE OUTLOOK
Moody’s lowered the adjusted standalone BCA of Cetelem to ba1 from a3,
following the implementation of the new banks ratings methodology.
At the same time, Moody’s also affirmed the bank’s B1 local
currency deposits and senior unsecured debt ratings, and its Caa2
foreign currency deposits rating. These reflect Moody’s view of
a very high probability of affiliate support from its parent, BNP
Paribas, rated baa1. The deposit and senior unsecured debt
ratings do not benefit from any government support uplift. At the
same time, Moody’s assigned a B1(cr)/Not Prime (cr) CR assessment
to Cetelem.
The bank’s deposit and senior unsecured debt ratings have a negative outlook
in line with the negative outlook on the Argentina’s Caa1 government bond
rating.
MACRO, GALICIA, SUPERVIELLE, AND BST’S RATINGS
AFFIRMED
The affirmations consider that the banks’ credit metrics remain
sound despite deteriorating economic conditions. Macro, Galicia,
and Supervielle’s Baa1.ar NSRs consider the bank’s
relatively strong fundamentals compared to other Argentine banks.
The three banks have well-established businesses and diversified
lending mixes. Their profitability profiles benefit from pricing
power, relatively good access to low cost core deposits, and
moderate credit costs. Only Argentine banks that benefit from support
from foreign parents have higher NSRs.
In contrast, BST’s Baa3.ar is among the weakest of
those assigned to Argentine banks, and reflects the bank’s
relatively modest earnings and capitalization profile. The bank
reported losses as of March 2015 as a result of rising funding cost from
its wholesale funding strategy, coupled with low business volume
led by the economy slowdown and regulatory caps on consumer finance credit
lines. In addition, BST has a relatively high reliance on
market funds and securitizations. Notwithstanding these challenges,
BST’s ratings are supported by its shareholders proven commitment
to the bank, as well as its improving asset quality profile,
with the bank report a non performing loan ratio of a moderate 3.4%
and adequate reserve coverage of over 90% over delinquencies.
ASSIGNMENT OF COUNTERPARTY RISK ASSESSMENTS
Moody’s has also assigned CR Assessments to 25 banks and financial institutions.
CR Assessments are opinions of how counterparty obligations are likely
to be treated if a bank fails, and are distinct from debt and deposit
ratings in that they (1) consider only the risk of default rather than
expected loss and (2) apply to counterparty obligations and contractual
commitments rather than debt or deposit instruments. The CR Assessment
is an opinion of the counterparty risk related to a bank’s covered bonds,
contractual performance obligations (servicing), derivatives (e.g.,
swaps), letters of credit, guarantees and liquidity facilities.
For most Argentine banks, the CR Assessment is positioned at B3
(cr), one notch above the Adjusted BCA and therefore above senior
unsecured and deposit ratings, reflecting Moody’s view that
its probability of default is lower than that of senior unsecured debt
and deposits. Moody’s believe that senior obligations represented
by the CR Assessment will be more likely preserved in order to limit contagion,
minimize losses and avoid disruption of critical functions. The
CR Assessments of Argentine banks do not benefit from any government support,
in line with our support assumptions on deposits and senior unsecured
debt.
.
However, in the cases of HSBC (Argentina), Banco Itau Argentina
S.A., Toyota Compañía Financiera Argentina
S.A., Banco Cetelem Argentina S.A.,
Banco Patagonia S.A., ICBC (Argentina) S.A.,
Banco Santander Rio S.A. and BNP Paribas, Moody’s
has assigned a CR Assessment of B1(cr), equal to the banks’
deposit ratings Both the banks’ CRAs and their deposit ratings are
constrained by Argentina’s B1 local currency deposit ceiling.
In the case of PSA Finance Argentina Compañía Financiera
S.A. Moody’s assigned a CR Assessment of B2 (cr) at
the level of the entity’s deposit rating, which is already
two notches above the rating of the sovereign.
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy page on www.moodys.com.ar
for a copy of this methodology.
Moody’s National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody’s global scale credit ratings in that they are
not globally comparable with the full universe of Moody’s rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a “.nn”
country modifier signifying the relevant country, as in “.za”
for South Africa. For further information on Moody’s approach to
national scale credit ratings, please refer to Moody’s Credit rating
Methodology published in June 2014 entitled “Mapping Moody’s National
Scale Ratings to Global Scale Ratings”.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody’s
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider’s credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.ar.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The following information supplements Disclosure 10 (“Information
Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J)
of SEC Rule 17g-7”) in the regulatory disclosures made at
the ratings tab on the issuer/entity page on www.moodys.com.ar
for each credit rating:
For identification of which credit ratings have payors that have or have
not paid Moody’s for services other than determining a credit rating
in the most recently ended fiscal year, please see the detailed
list under the following link: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_182415.
The list is an integral part of this press release.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com.ar,
for each of the ratings covered, Moody’s disclosures on the
lead analyst and the Moody’s legal entity that has issued the ratings.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The regulatory report related to this rating action is available on www.moodys.com.ar.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody’s legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Maria Valeria Azconegui
Asst Vice President – Analyst
Financial Institutions Group
Moody’s Latin America ACR
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600
M. Celina Vansetti
MD – Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody’s Latin America ACR
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600
Financial Institutions Group
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PR_328008
EPI
M. Celina Vansetti
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New York
PR_328008
2015-06-16T22:50:27Z
Asst Vice President – Analyst
eng
BKG
Buenos Aires City
/2015/06/16/PR_328008.asp
Financial Institutions Group
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Maria Valeria Azconegui
C
Buenos Aires City
Rating Action
MIS
MD – Banking
Moody’s Latin America concludes review of Banco Cetelem Argentina and assigns Counterparty Risk Assessments to Argentine Banks
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