From Knight – Some Debt At Some Banks May Become Junk

The people at Knight put together a comprehensive list of potential ratings for banks in Europe after Moody’s came out with their outlooks. I agree that banks getting shifted to non-investment grade is a big deal.  We saw the impact for Portugal once it got taken out of the indices, and I think for banks it will be an even bigger deal to lose that investment grade status.  Sure, they can still go to the LTRO, but it is hard to function as anything other than a zombie bank once you lose that rating.

Knight report below

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Moody’s Investors Service placed the ratings of 109 financial institutions on review for possible downgrade, citing as reasons for the reviews · the difficult operating environment · weakening sovereign creditworthiness, as well as · challenges related to banks’ capital market activities

 

While I don’t normally consider it my remit to comment on the opinions of credit rating agencies, Moody’s review threatens to push large swathes of bank liabilities from the “investment grade” into the “non-investment grade” universe, which can force selling for many investors and thereby artificially distort prices of such obligations. To the extent that such forced selling has not set in to any meaningful extent yet, investors with mandates tied to credit indices (which use ratings as selection criteria) or directly constrained by rating guidelines might want to consider the likely changes and start to proactively manage their exposures with the forthcoming downgrades in mind.

 

The following are European banks and classes of their securities which are likely to face a downgrade to non-investment grade from the IG category as a result of this rating review:

 

Austria:

BAWAG     dated sub debt remains on watch down from Baa3

AUSTVB    1 notch … dated sub debt at Baa3

 

Denmark:

Denmarks Skibskredit  5 notches … senior at A2 (to Ba1)

Dankske Bank          3 notches … junior sub at Baa2 and hybrids at Baa3

DLR Credit            3 notches … senior at Baa1 (to Ba1)

Jyske Bank            3 notches … junior sub at Baa2 and hybrids at Baa3

Nykredit Bank         3 notches … junior sub at Baa1 and hybrids at Baa2

Spar Nord Bank        3 notches … senior at Baa2

Sydbank               3 notches … junior sub at Baa2 and hybrids at Baa3

 

Netherlands:

SNS Bank              3 notches … senior at Baa1; dated sub at Baa2

Friesland Bank        3 notches … dated sub at Baa1

 

Finland:

Sampo Bank            3 notches … hybrids at Baa3

 

France:

BNP Paribas              2 notches … hybrids at Baa3

Credit Agricole          2 notches … hybrids at Baa3

HSBC France              2 notches … junior sub at Baa2

Oddo & Cie               2 notches … senior at Baa2; subs and hybrids as well

Banque Monetaire et Fin. 2 notches … hybrids at Baa3 (BPCE Group)

BFCM                     2 notches … hybrids at Baa3

Credit Immobilier        4 notches … junior sub at A3 (to Ba1)

 

Germany:

Deutsche Bank            2 notches … hybrids at Baa2

Dt. Postbank             2 notches … sub debt at Baa2

DZ Bank …                1 notch   … some hybrids at Baa3

Nord/LB (NDB)            2 notches … sub debt at Baa2

Bremer Landesbank        2 notches … sub debt at Baa2

Unicredit Bank AG (HVB)  2 notches … sub debt at Baa2

 

Ireland:

Ulster Bank (RBS)        1 notch   … sub debt at Baa3

 

Italy:

Banca delle Marce         3 notches … senior at Baa1; sub Baa2; junior sub Baa3

MONTE                     2 notches … sub at Baa2

Banca Pop Alto Adige      3 notches … senior at Baa1; sub Baa2; junior sub Baa3

Banca Pop di Cividale     4 notches … senior at Baa1; sub Baa2; junior sub Baa3

Banca Pop di Marostica    3 notches … senior at Baa2

Banca Pop di Spoleto      4 notches … senior at Baa1

Banca Sella Holding       2 notches … sub debt and Tier III at Baa2

Banca Tercas              2 notches … senior at Baa3

Banco Popolare            2 notches … senior at Baa2; sub Baa3; Tier III at Baa3

Banca Italease            1 notch   … senior at Baa3

Cassa di Risp di Bolzano  3 notches … senior at Baa2; sub and junior sub Baa3

Cassa di Risp Chieti      2 notches … senior at Baa3

Credito Valtellinese      4 notches … senior at Baa1; sub Baa2, junior sub Baa3

Iccrea BancaImpresa       1 notch   … sub debt and hybrids at Baa3

Unicredit                 2 notches … junior sub at Baa2

Unione di Banche Italiane 3 notches … sub debt at Baa1, junior sub Baa2, T3 Baa1

Unipol Banca              4 notches … senior at Baa2

 

Norway:

DNB Bank                  2 notches … hybrids at Baa3

 

Portugal:

Banco Santander Totta     2 notches … senior at Baa2; sub at Baa3

 

Spain:

BBVA                      3 notches … hybrids at Baa2

CaixaBank                 3 notches … hybrids at Baa3

La Caixa                  3 notches … senior at Baa1

Bankinter                 3 notches … sub debt at Baa1

Banco Popular Espanol     no guidance … sub debt at Baa2

Caja Rural de Granada     3 notches … senior at Baa1

Banca March               3 notches … senior at Baa1; junior sub at Baa2

Banco Sabadell            no guidance … sub debt at Baa3

Ibercaja                  2 notches … sub debt at Baa3

Liberbank                 2 notches … sub debt at Baa3

Cajamar Caja Rural        1 notch   … senior at Baa3

Banco CEISS               no guidance … senior at Baa3

Lico Leasing              1 notch   … senior at Baa3

 

Sweden:

Svenska Handelsbanken     2 notches … hybrids at Baa2

Swedbank                  1 notch   … junior sub at Baa3

 

UK:

Lloyds Banking Group      2 notches … sub debt at Baa3

Lloyds TSB Bank plc       2 notches … sub debt at Baa2; junior sub at Baa3

HBOS                      2 notches … sub debt at Baa3

Bank of Scotland plc      2 notches … sub debt at Baa2; junior sub at Baa3

Royal Bk of Scotland plc  1 notch   … sub debt at Baa3

Natwest                   1 notch   … sub debt at Baa3

Barclays plc (HoldCo)     2 notches … sub debt at Baa2

Barclays Bank plc (OpCo)  2 notches … junior sub at Baa2; hybrids at Baa2/Baa3

As mentioned, the list above indicates banks and classes of securities which might cross over into the non-IG space. However, the overall list of rating reviews is larger still with the following notching guidance:

 

1 notch:

Banco BPI, Banco Espirito Santo, Banco Italease, Banesto ,BANIF – Banco International do Funchal, Banque et Caisse d’Epargne de l’Etat, BCP, Caixa Economica Montepio Geral, Caixa Gral de Depositos, Cajamar Caja Rural, DZ Bank, Espirito Santo Financial Group, HESLAN, Iccrea BancaImpresa, ING, Intesa Sanpaolo, LBBW, Locindus, Nordea,RBS, RZB, SEB, SocGen, Swedbank, WGZ Bank

 

2 notches:

ABN Amro, Banca Carige, Banca Monte dei Paschi di Siena, Banca Sella, Banca Tercas, Banco Popolare, Banco Santander Totta, Barclays, BFCM, BNP Paribas, BPCE, Bremer Landesbank, Cassa di Risparmio della Provincia di Chieti, Commerzbank, Credit Agricole, Credit Mutuel Arkea, DekaBank, Deutsche Bank, DNB Bank, Dt. Hypothekenbank, Dt. Postbank, HSBC, HSBC, Ibercaja, ING Diba, KBC, LaSer Cofinoga, Liberbank, Lico Leasing, Lloyds Group, Nord/LB, Oddo & Cie, Pojhola Bank, Rabobank, Santander, Svenska Handelsbanken, Unicredit

 

3 notches:

Banca della Marca Credito Cooperativo, Banca March, Banca Monastier e del Sile, Banca Popolare Alto Adige-Suedtiroler Volksbank, Banca Popolare di Marostica, Banco Cooperativo Espanol, Bancoa, Bankinter, BBVA, BNL, CaixaBank, Caja Rural de Granada, Caja Rural de Navarra, Cassa di Risparmio di Bolzano-Suedtiroler Sparkasse, Cassa di Risparmio di Parma e Piacenza, CECA (Confederacion Espanola de Cajas de Ahorro), Credit Suisse, Credito Emiliano, Dankse, Erste Bank, Eurohypo, Friesland Bank, Jyske Bank, Landshypotek, Leaseplan, Nykredit, Ringkjobing Landobank, Sampo Bank, SNS Bank, Spar Nord Bank, Sydbank, UBS, Unione di Bance Italiane

 

4 notches:

Banca Popolare di Cividale, Caisse Centrale du Credit Immobilier de France, Credito Valtellinese, Unipol Banca

 

5 notches:

Denmarks Skibskredit

 

No notching guidance:

Banco CAM, Banco CEISS, Banco Pastor, Banco Popular Espanol, Banco Sabadell Unicaja Banco

Short-term ratings

Further, the likely downgrades mean, that a whole bunch of banks will see their short term ratings lowered as well (which could impact their short-term market funding negatively). The following will likely lose their P-1 rating:

 

Banca Popolare Friuladria, Banco Cooperativo Espanol, Banco Popular Espanol, Banesto, Bankinter, Barclays plc (Holding  …. Bank affirmed at P-1), BBVA, BNL, Bremer Landesbank, Caisse Centrale du Credit Immobilier de France, CaixaBank, Cassa di Risparmio di Parma e Piacenza, CECA, Commerzbank, Danske Bank, Dt. Postbank, Erste Bank, Eurohypo, ICO (Instituto de Credito Official) … direct downgrade to P-2, Intesa Sanpaolo, Jyske Bank, KBC, LaSer Cofinoga, LBBW, Lloyds, Nord/LB, Nykredit, RBS, Sampo Bank, Swedbank, Sydbank, UBS, Unicaja, Unicredit.

 

  Otto Dichtl ** 16th February 2012 ** odichtl@knight.com ** +44 20 7997 2153

 

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