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Moody's Downgrades Ratings of Six Greek Banks

Author Sabina Kotova
Moody's Downgrades Ratings of Six Greek Banks

BUCHAREST (Romania), March 9 (SeeNews) – International rating agency Moody's said on Wednesday it downgraded the deposit and debt ratings of the National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece, and Attica Bank, with a negative outlook.

Most of these banks have units in countries of Southeast Europe.

The rating actions follow Moody's downgrade of Greece's sovereign rating to B1 from Ba1 and the rating agency's reassessment of some of the banks' standalone credit strength, reflected in their bank financial strength ratings, Moody’s said in a statement.

Following is the full text of the statement:

“Moody's Investors Service has today downgraded the deposit and debt ratings of the following six Greek banks: National Bank of Greece SA (NBG), to Ba3 from Ba1; EFG Eurobank Ergasias SA (Eurobank), to Ba3 from Ba1; Alpha Bank AE (Alpha), to Ba3 from Ba1; Piraeus Bank SA (Piraeus), to Ba3 from Ba1; Agricultural Bank of Greece (ATE), to B1 from Ba2; and Attica Bank SA, to B1 from Ba2. The outlook on all these ratings is negative.

These rating actions follow Moody's downgrade of Greece's sovereign rating to B1 from Ba1 and Moody's reassessment of some of the banks' standalone credit strength, reflected in their bank financial strength ratings (BFSRs).

Today's rating actions conclude the review for possible downgrade, which Moody's initiated on 17 December 2010. A full list of the affected ratings is included at the end of this press release.

RATINGS RATIONALE

The key drivers for today's rating actions are:

(1) Moody's decision on 7 March to downgrade Greece's government bond ratings to B1 from Ba1. Under Moody's methodology, a government's credit strength serves as a key input in assessing the capacity of a country to support its banking system which, in turn, can provide rating uplift to a bank's deposit and debt ratings.

(2) Moody's re-assessment of some banks' intrinsic financial strength (standalone BFSRs), due to persistent pressure on liquidity and asset quality, and the banks' material exposure to Greek government securities.

Although Moody's central scenario is that holders of Greek government debt will not bear losses, the rating agency believes that the likelihood of a sovereign default or distressed exchange has risen, as denoted by the new B1 government rating.

DEPOSIT AND DEBT RATINGS

The downgrade of the Greek government's debt rating has prompted Moody's to lower Greece's systemic support indicator (SSI) , which is the measure Moody's uses to determine bank rating uplift due to systemic support considerations. By lowering Greece's SSI to Ba3 from Baa3, the uplift imbedded in the deposit and debt ratings of the banks was reduced.

The SSI denotes the country's capacity to provide support to its banking system beyond that indicated by its own rating level, as it incorporates a range of tools at its disposal (financial and non-financial), which for Greece includes elements of support now available through European Commission/ECB/IMF programmes.

These programmes include, but are not limited to (i) the �10 billion Hellenic Financial Stability Fund, which is available as a capital backstop; (ii) the ECB's decision to suspend the application of the minimum credit-rating threshold in its collateral eligibility requirements for marketable debt instruments issued or guaranteed by the Greek State; and (iii) the Greek government's guarantee scheme (approved by the European Commission).

Under that scheme, the banks can issue debt that is eligible collateral for ECB's refinancing operations. The availability of these tools allows some systemically important Greek banks to be rated one notch higher than the government bond rating.

STANDALONE BANK FINANCIAL STRENGTH RATINGS (BFSRs)

The downgrade of the BFSRs was prompted by the increased credit and liquidity risk emanating from the banks' material exposure to Greek government securities.

The downgrade of the Greek government bond rating to B1 reflects a rising probability of government-debt bondholders experiencing losses. In addition, today's rating actions reflect the banks' limited funding options and their dependence on ECB funding, which accounts for at least 20% of their balance sheet.

Moody's believes that this dependency could increase during 2011 and that a possible government debt default -- or distressed exchange -- could not only pressure the banks' capital structures with material government securities holdings, but might also indirectly weaken their already weak funding positions.

This would make them even more dependent on ECB funding. To capture these increasing risks, Alpha's BFSR was downgraded by one notch, compared with the two-notch downgrade of NBG and Eurobank. The smaller adjustment in the case of Alpha reflects the bank's relatively low exposure to Greek government bonds -- at approximately 80% of its Tier 1, compared with 150% plus for NBG and Eurobank.

Moody's notes that the BFSRs of Piraeus, ATE and Attica Bank were affirmed at E+ with stable outlooks, as the low levels of these ratings already capture Moody's concerns outlined above.

NEGATIVE OUTLOOK

The negative outlook on the banks' deposit and debt ratings reflects (i) the negative outlook on the government bond ratings; and (ii) Greece's sustained challenging operating conditions and difficult macroeconomic environment. In particular, these two latter factors continue to exert pressure on banks' financial fundamentals -- including asset quality and funding metrics -- and their earnings generating capabilities.

FOREIGN-OWNED SUBSIDIARIES

Moody's has also affirmed the ratings of Emporiki Bank of Greece SA (Baa3/Prime-3/E+) and General Bank of Greece SA (Baa3/Prime-3/E+), with all ratings carrying a stable outlook. Both banks continue to receive significant uplift from Moody's assessment of a very high probability of support from their French parents (Credit Agricole SA (Aa1/C+) and Societe Generale (Aa2/C+), respectively).

Moody's notes that the BCAs of Emporiki Bank and General Bank remain under negative pressure and could be lowered, within the E+ BFSR category.

The specific rating changes implemented today are as follows:

National Bank of Greece SA, NBG Finance plc, and National Bank of Greece Funding Limited:

- BFSR downgraded to D- from D+, mapping into a BCA of Ba3

- Long-term deposit ratings and senior unsecured debt ratings downgraded to Ba3 from Ba1

- Subordinated debt ratings downgraded to B1 from Ba2

- Backed (government-guaranteed) senior unsecured ratings downgraded to Ba3 from Ba1

- Preferred stock (Hybrid Tier 1) downgraded to B3 (hyb) from B1 (hyb)

All the above ratings carry a negative outlook

EFG Eurobank Ergasias SA, EFG Hellas plc, EFG Hellas (Cayman Islands) Limited, and EFG Hellas Funding Limited:

- BFSR downgraded to E+ from D, mapping into a BCA of B1

- Long-term deposit ratings and senior unsecured debt ratings downgraded to Ba3 from Ba1

- Subordinated debt ratings downgraded to B1 from Ba2

- Backed (government-guaranteed) senior unsecured MTN downgraded to Ba3 from Ba1

- Preferred stock (Hybrid Tier 1) downgraded to Caa1 (hyb) from B2 (hyb)

Deposit, debt and preferred stock ratings carry a negative outlook; BFSR carries a stable outlook

Alpha Bank AE, Alpha Credit Group plc and Alpha Group Jersey Limited:

- BFSR downgraded to D- from D, mapping into a BCA of Ba3

- Long-term deposit and senior unsecured debt ratings downgraded to Ba3 from Ba1

- Backed (government-guaranteed) senior unsecured ratings downgraded to Ba3 from Ba1

- Subordinated debt ratings downgraded to B1 from Ba2

- Preferred stock (Hybrid Tier 1) downgraded to B3 (hyb) from B2 (hyb)

All the above ratings carry a negative outlook

Piraeus Bank SA, Piraeus Group Finance plc, and Piraeus Group Capital Limited:

- BFSR affirmed at E+, mapping into a BCA of B1

- Long-term deposit and senior unsecured debt ratings downgraded to Ba3 from Ba1

- Backed (government-guaranteed) senior unsecured ratings downgraded to Ba3 from Ba1

- Subordinated debt ratings downgraded to B1 from Ba2

- Preferred stock (Hybrid Tier 1) affirmed at Caa1 (hyb)

Deposit, debt and preferred stock ratings carry a negative outlook; BFSR carries a stable outlook

Agricultural Bank of Greece SA and ABG Finance International plc:

- BFSR affirmed at E+, mapping into a BCA of B2

- Long-term deposit and senior unsecured debt ratings downgraded to B1 from Ba2

- Subordinated debt ratings downgraded to B2 from Ba3

Deposit and debt ratings carry a negative outlook; BFSR carries a stable outlook

Attica Bank SA and Attica Funds plc:

- BFSR affirmed at E+, mapping into a BCA of B1

- Long-term deposit ratings downgraded to B1 from Ba2

- Subordinated debt ratings downgraded to B2 from Ba3

Deposit and debt ratings carry a negative outlook; BFSR carries a stable outlook

Emporiki Bank of Greece SA and Emporiki Group Finance plc:

- BFSR affirmed at E+, mapping into a BCA of B1

- Deposit and senior debt ratings affirmed at Baa3/Prime-3

- Subordinated debt ratings affirmed at Ba1

All ratings carry a stable outlook

General Bank of Greece SA:

- BFSR affirmed at E+, mapping into a BCA of B1

- Deposit ratings affirmed at Baa3/Prime-3

All ratings carry a stable outlook

The previous rating actions on NBG, Eurobank, Alpha, Piraeus, ATE, and Attica Bank were implemented on 17 December 2010, when the ratings were placed on review for possible downgrade. The previous rating actions on Emporiki Bank of Greece SA and General Bank of Greece SA were implemented on 15 June 2010, when their deposit and debt ratings were downgraded.

All banks affected by today's review are headquartered in Athens, Greece:

- National Bank of Greece SA reported total assets of EUR123.5 billion as of September 2010

- EFG Eurobank Ergasias SA reported total assets of EUR87.2 billion as of December 2010

- Alpha Bank SA reported total assets of EUR67.7 billion as of September 2010

- Piraeus Bank SA reported total assets of EUR57.6 billion as of September 2010

- Agricultural Bank of Greece SA reported total assets of EUR31.9 billion as of September 2010

- Emporiki Bank of Greece SA reported total assets of EUR26.8 billion as of December 2010

- Attica Bank SA reported total assets of EUR4.8 billion as of September 2010

- General Bank of Greece SA reported total assets of EUR4.6 billion as of September 2010."

 

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