Fitch Ratings has downgraded National Bank of Greece's, Efg Eurobank Ergasias', Alpha Bank's, Piraeus Bank's and Agricultural Bank of Greece's Long-term Issuer Default Ratings (IDR) and Support Rating Floors (SRF) to 'CCC' from 'B-' and Short-term IDRs to 'C' from 'B'. The Viability Rating (VR) of the five banks has been affirmed at 'f'. A full list of rating actions is at the end of this comment.
The rating actions follow the downgrade of Greece's sovereign rating to 'CCC' from 'B-' (see "Fitch Takes Negative Rating Actions on Greece" dated 17 May 2012 on www.fitchratings.com). State-guaranteed issues have been also downgraded to 'CCC' from 'B-'.
The five Greek banks' Long-term IDRs remain on their SRF which has been downgraded to 'CCC' to reflect the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union (EMU).
In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF programme of fiscal austerity and structural reform, an exit of Greece from EMU would be probable and/or this could be followed by a withdrawal of international support to Greek banks. A Greek exit would likely result in widespread default on private sector as well as sovereign euro-denominated obligations.
Following Greek banks' large losses in 2011, after impairing their Greek government debt exposure from the Private Sector Involvement (PSI) Plus, EUR18bn capital support through the Hellenic Financial Stability Fund (HFSF) as part of the IMF/EU support programmes has been committed to raise the four major Greek banks' total capital adequacy ratio to the required minimum 8%. However, such support has not yet been transferred to the banks and further capital injections will be needed to reach the minimum 9% core capital ratio required by the Bank of Greece by September 2012.
The Bank of Greece and the ECB have continued to provide emergency liquidity assistance which has absorbed deposit outflows from the banking system to date.
Greek banks' VR of 'f' reflects the banks' failure if they had not received external support. At the moment they effectively receive all capital needed, and if the situation in the country stabilises and liquidity is restored, Fitch will upgrade the banks' VR to a rating level commensurate with its post-supported financial strength. However, Fitch anticipates that the VR of Greek banks will, at best, remain at a deeply sub-investment grade rating level to reflect the numerous challenges they are faced with and their substantial weak credit fundamentals.
As a result of the above rating actions and increased encumbrance assets, banks' senior unsecured debt ratings have been downgraded to 'CC'/'RR5' from 'B-'/'RR4' in line with Fitch's criteria. The 'RR5' reflects the increased levels of assets pledged as collateral by banks, reducing the recovery rate to below average (11%-30%) for senior unsecured creditors. Banks' subordinated and hybrid capital issues have been affirmed at 'C'/'RR6' and 'C', respectively.
The rating actions are as follows:
National Bank of Greece S.A.
Long-term IDR downgraded to 'CCC' from 'B-'
Short-term IDR downgraded to 'C' from 'B'
VR affirmed at 'f'
Support Rating affirmed at '5'
Support Rating Floor revised to 'CCC' from 'B-';
Senior notes downgraded to 'CC'/'RR5' from 'B-'/'RR4'
Short-term senior notes downgraded to 'C' from 'B';
Hybrid capital affirmed at 'C'
State-guaranteed issues downgraded to 'CCC' from 'B-'
Efg Eurobank Ergasias S.A.
Long-term IDR downgraded to 'CCC' from 'B-'
Short-term IDR downgraded to 'C' from 'B'
VR affirmed at 'f'
Support Rating affirmed at '5'
Support Rating Floor revised to 'CCC' from 'B-'
Senior notes downgraded to 'CC'/'RR5' from 'B-'/'RR4'
Short-term senior notes downgraded to 'C' from 'B'
Market-Linked Senior notes downgraded to 'CCemr'/'RR5' from 'B- emr'/'RR4'
Commercial paper downgraded to 'C' from 'B'
Subordinated notes affirmed at 'C'/'RR6'
Hybrid capital affirmed at 'C'
State-guaranteed issues downgraded to 'CCC' from 'B-'
Short-term state-guaranteed issues downgraded to 'C' from 'B'
Alpha Bank S.A.
Long-term IDR downgraded to 'CCC' from 'B-'
Short-term IDR downgraded to 'C' from 'B'
VR affirmed at 'f'
Support Rating affirmed at '5'
Support Rating Floor revised to 'CCC' from 'B-'
Senior notes downgraded to 'CC'/'RR5' from 'B-'/'RR4'
Short-term senior notes downgraded to 'C' from 'B'
Market-Linked Senior notes downgraded to 'CCemr'/'RR5' from 'B- emr'/'RR4'
Subordinated notes affirmed at 'C'/'RR6'
Junior subordinated notes affirmed at 'C'
Hybrid capital affirmed at 'C'
State-guaranteed issues downgraded to 'CCC' from 'B-'
Short-term state-guaranteed issues downgraded to 'C' from 'B'
Piraeus Bank S.A.
Long-term IDR downgraded to 'CCC' from 'B-'
Short-term IDR downgraded to 'C' from 'B'
VR affirmed at 'f'
Support Rating affirmed at '5'
Support Rating Floor revised to 'CCC' from 'B-'
Senior notes downgraded to 'CC'/'RR5' from 'B-'/'RR4'
Commercial paper downgraded to 'C' from 'B'
State-guaranteed issues downgraded to 'CCC' from 'B-'
Agricultural Bank of Greece (ATEbank)
Long-term IDR downgraded to 'CCC' from 'B-'; Removed from Rating Watch Negative (RWN)
Short-term IDR downgraded to 'C' from 'B'; Removed from RWN
VR affirmed at 'f'
Support Rating affirmed at '5'
Support Rating Floor revised to 'CCC' from 'B-'; Removed RWN
State-guaranteed issues downgraded to 'CCC' from 'B-'
The rating impact, if any, from the above rating actions on Greek banks' subsidiaries and covered bonds will be detailed in separate comments.
In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's VR and the prospect of external support is reflected in Fitch's Support Ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs.
Contacts:
Primary Analyst
Cristina Torrella
Senior Director
+34 93 323 8405
Fitch Ratings Espana, S.A.U.
Paseo de Gracia, 85, 7th Floor
08008 Barcelona
Secondary Analyst
Josep Colomer
Director
+34 93 323 8416
Committee Chairperson:
Maria Jose Lockerbie
Managing Director
+44 203 530 1083
Media Relations: Michelle James, London, Tel: +44 0203 530 1574, Email: Michelle.James@fitchratings.com.
Additional information is available on www.fitchratings.com.
The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 16 August 2011, 'Rating Bank Regulatory Capital and Similar Securities', dated 15 December 2011 and 'Recovery Rating For Financial Institutions", dated August 2011 are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Rating Bank Regulatory Capital and Similar Securities
Recovery Ratings for Financial Institutions
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