(The following statement was released by the rating agency)
Oct 10 - Fitch Ratings has placed NCG Banco SA's (NCG) Support Rating (SR)of '3' and its Support Rating Floor (SRF) of 'BB+' on Rating Watch Negative(RWN). As a result, its Long-term Issuer Default Rating (IDR) of 'BB+', which isbased on the moderate probability of the authorities supporting the bank, andits Short-term IDR of 'B', have also been placed on RWN. At the same time, Fitchhas affirmed NCG's Viability Rating (VR) of 'c'. A full list of rating actionsis at the end of this comment.
RATING ACTION RATIONALE AND DRIVERS - IDRs, SUPPORT RATING and SRF
The rating actions reflect Fitch's belief that there is a moderate probabilitythat NCG will continue to be supported by Spain's Fund of Orderly BankRestructuring (FROB) with the ultimate goal of restoring the bank's viability,after undergoing a restructuring plan and transferring its real estate exposureto an asset management company.
However, because of the bank's problems and high recapitalisation needs, thereis heightened risk that an orderly resolution could take place. This couldinclude a recapitalisation plan for NCG's future sale, but also alternativescenarios that, even if customer depositors are fully compensated as the agencywould expect, could still qualify as some form of default or 'restricteddefault' under Fitch's definitions and criteria. As a result, the SupportRating, SRF and IDRs have been placed on RWN. NCG has relatively fewnon-customer deposit senior unsecured liabilities on which it might beconsidered politically acceptable or rational to enforce losses.
RATING ACTION RATIONALE AND DRIVERS - VR
NCG's VR has been affirmed at 'c' to reflect the exceptionally high levels offundamental credit risk that remain and that the failure of the bank (underFitch's definitions) is imminent or inevitable. Its exposure to the stressedSpanish real estate market means NCG is in need of substantial recapitalisation,as was confirmed recently by the results of the stress test undertaken by OliverWyman published at end-September 2012.
DATED SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
NCG's dated subordinated debt has been downgraded to 'C' from 'CC' to reflect ahigh risk of large losses being enforced onto these instruments in line with theburden sharing laid out in the MOU and in Royal Decree Law 24/2012. Its upperTier 2 debt and preferred stock have been affirmed at 'C' for the same reason.
RATING SENSITIVITIES - SUPPORT RATING, SRFs and IDRs
On the downside, NCG's IDRs, SR and SRF are sensitive to a downgrade of theSpanish sovereign rating or to any change in Fitch's assumptions around thelevel of support available to the bank, and in the near term, one of thealternative orderly resolution scenarios arising.
On the upside, NCG's IDR could ultimately be affirmed or upgraded were the bankto be recapitalised and its VR upgraded to 'bb+' or higher or if the bank wereto be recapitalised and sold to a higher-rated bank.
RATING SENSITIVITIES - VR
Upon the confirmation or execution of any recapitalisation plan (due byend-November 2012) Fitch would downgrade NCG's VR to 'f', reflecting the bank'sfailure under Fitch's definitions. After recapitalisation, the agency willre-assess NCG's VR and upgrade it to a level commensurate with its post-supportcredit profile.
The rating actions are as follows:
NCG:Long-term IDR: 'BB+' placed on RWNShort-term IDR: 'B' placed on RWNViability Rating: affirmed at 'c'Support Rating: '3' placed on RWNSupport Rating Floor: 'BB+' placed on RWNSenior unsecured debt long-term rating: 'BB+' placed on RWNSenior unsecured debt short-term rating and commercial paper: 'B' placed on RWNSubordinated lower tier 2 debt: downgraded to 'C' from 'CC'Subordinated upper tier 2 debt: affirmed at 'C'Preferred stock: affirmed at 'C'State-guaranteed debt: affirmed at 'BBB' For all of Fitch's Eurozone Crisis commentary go to
(Caryn Trokie, New York Ratings Unit)