Category: Banking

Banking

Banco de Chile’s Proposed HKD 372 Million Senior Unsecured Notes Rated ‘A’

AtlanticIS

SAO PAULO (S&P Global Ratings) July 29, 2019–S&P Global Ratings assigned its ‘A’ issue-level rating on Banco de Chile’s (A/Stable/A-1) proposed HKD372 million senior unsecured notes due July 29, 2031. The issuance is part of the bank’s $3 billion medium-term notes program. The bank will use the proceeds primarily for general corporate purposes.

Our rating on the notes reflects their pari passu ranking with the bank’s other senior unsecured debt obligations. As a result, the rating is the same as the long-term issuer credit rating on the bank. The notes constitute only about 0.1% of Banco de Chile’s total funding base. Therefore, this issuance doesn’t change our view of the bank’s funding profile and does not increment refinancing risk.

Banco de Chile has a well-established brand and diversified market access in the highly competitive Chilean banking system, factors that confer steady revenue flow. Moreover, the bank’s sound asset quality metrics and conservative underwriting standards continue to drive sound financial results, although pressured by lower inflation prospects in the country. Capital flexibility should improve after the bank repays the long-term subordinated obligations due to the central bank as part of the bailout following the economic and banking industry turmoil in 1982-1983. From now on, the bank would be better positioned to adopt new capital requirements that will come into force in the next few years. The ratings also reflect our view of a funding structure highly diversified across sources and counterparties and a high deposit base with a stable amount of retail deposits. Its liquidity position provides adequate cushion to cope with unexpected cash outflows over the next 12 months.

Banking

SCOR Brasil Upgraded To ‘AA-‘ On Revised Criteria; Outlook Stable

AtlanticIS
  • SCOR SE has a leading franchise in the U.S. life reinsurance, with robust capitalization according to our risk-based model (above the ‘AAA’ level) and on a regulatory basis.
  • We are affirming our ‘AA-‘ ratings on SCOR’s core operating subsidiaries, and raising our ratings on SCOR Brasil Resseguros SA to ‘AA-‘.
  • The outlook is stable because we anticipate that SCOR SE will maintain capital adequacy above the ‘AAA’ level under our risk-based model and generate earnings in line with global reinsurance peers’.

PARIS (S&P Global Ratings) July 25, 2019–S&P Global Ratings today affirmed its ‘AA-‘ long-term insurer financial strength and issuer credit ratings on the core subsidiaries of France-domiciled reinsurer SCOR SE (see the ratings list below for further details). The outlook is stable.

In addition, we raised to ‘AA-‘ our ratings on South Africa-based SCOR Africa Ltd. and Brazil-based SCOR Brasil Resseguros SA from ‘A-‘ and ‘BBB’ respectively under our revised group rating methodology.

We have also affirmed our ratings on SCOR’s outstanding hybrid and debt instruments.

The outlook is stable because we expect that SCOR will generate strong and sustainable earnings that enable it to maintain capital adequacy above the ‘AAA’ level under our risk-based model. We also anticipate the group will benefit from modest price increases in global non-life reinsurance business in 2019 and maintain its leading position, particularly in the life reinsurance market, further contributing to its competitiveness.

We could lower the ratings if the group’s capital adequacy deteriorated below the ‘AAA’ range for a prolonged period as a result of large unexpected losses or weaker-than-expected earnings, or if SCOR’s risk profile weakened, for example, through increased exposure to catastrophes.

We consider a positive rating action very unlikely over the next two years.

The group has a top-five position in the global reinsurance industry, with a very strong franchise and sound diversification by lines of business and regions. In our view, global non-life reinsurance is inherently more volatile than many other lines of insurance business. That said, the group has robust capital adequacy under our risk-based capital model and, according to the regulatory approach, even after severe natural catastrophe losses over the past two years.

We view positively SCOR’s risk management capabilities and we anticipate that they will enable the group to continue optimizing capital allocation and earnings and enhance its risk-return profile.

SCOR Africa and SCOR Brasil Resseguros are licensed to write reinsurance business and SCOR SE guarantees all of their obligations. In our view, this guarantee qualifies for full credit substitution with SCOR SE. We believe the group is willing and able to sufficiently support SCOR Africa and SCOR Brasil Resseguros during stress associated with a sovereign default. Therefore, we have equalized our ratings on SCOR Africa and SCOR Brasil Resseguros with that on SCOR SE under our revised group methodology.

Banking

Moody’s raises outlook for Spanish banking system to positive as troubled assets decline

AtlanticIS

Madrid, June 12, 2018 — Moody’s has raised its outlook for Spain’s banking system to positive from stable, as robust economic growth and disposals of troubled assets help banks bolster their asset quality. In the rating agency’s view, other fundamental factors such as capital, funding and liquidity levels and profitability will remain stable.

Stocks of non-performing loans have been falling since peaking in January 2014 and Moody’s expects the improvement to continue over the 12 to 18 month outlook period.

Solid economic growth will support a stable operating environment. While Moody’s expects growth to slow to 2.7% in 2018 and 2.3% in 2019, Spain’s economy is still among the fastest growing in the euro area. This robust growth should extend a multi-year decline in unemployment and support improved credit conditions for Spanish banks.

Capital will remain stable at low levels for Spanish banks as their large volume of deferred tax assets, which Moody’s considers to be a low-quality form of capital, undermines their capital strength.

Moody’s forecasts that bank profitability will remain broadly stable over the next 12 to 18 months. Higher fee and commission income will compensate for declining net interest income, with revenues benefiting from more diverse earning sources. Moody’s also expects the cost of risk to remain broadly stable.

Funding and liquidity conditions will also be stable over the outlook period. Stable deposits and shrinking loan books have narrowed the funding gap at Spanish banks in recent years, though this process will decelerate as demand rises for credit.