DBRS Upgrades Deposit Ratings of Certain Portuguese Banks

DBRS Ratings GmbH (DBRS) upgraded by one notch the Long-Term Deposit ratings of 4 Portuguese banks, specifically Banco Comercial Português, S.A; Caixa Económica Montepio Geral (Banco Montepio); Caixa Geral de Depósitos, S.A. and Novo Banco, S.A. (or collectively “the Banks”). The Short-Term Deposit ratings of 3 banks were also upgraded. A full list of rating actions is included at the end of this press release.

KEY RATING CONSIDERATIONS

Today’s rating action reflects the introduction in Portugal of full depositor preference in bank insolvency and resolution proceedings with the implementation of Portuguese Law No. 23/2019 from March 14, 2019. The Law also introduces a new class of debt, which is expected to be referred to as Senior Non-Preferred Debt. This new class of debt will rank below preferential categories of creditors and existing Senior debt, but above Subordinated debt.

The Law No. 23/2019 amended the rules regarding creditor hierarchy in insolvency proceedings. In line with article 108 BRRD, preference is granted to insured deposits and non-insured deposits by individuals, micro enterprises, and small and medium-sized enterprises (or SMEs). Furthermore, the Law 23/2019 establishes that from March 14, 2019, all other deposits, including Corporate and institutional deposits held in legal banking entities in Portugal, will rank senior to other unsecured debt, but junior to insured deposits, deposit guarantee schemes and the portion of uninsured deposits held by individuals and SMEs.

Reflecting this full depositor preference scheme, and decreasing likelihood for deposits to absorb losses, DBRS upgraded by one notch the Long-Term Deposit ratings of: 1) Banco Comercial Português, S.A and its branch, BCP Macao Branch, 2) Caixa Económica Montepio Geral (Banco Montepio), 3) Caixa Geral de Depósitos, S.A. and its branch, CGD France Branch, 4) Novo Banco, S.A. and its branches, Novo Banco Cayman Islands Branch and Novo Banco Luxembourg. The Long-Term Deposit ratings are now positioned one notch above their Intrinsic Assessment (IA). DBRS had previously rated these Long-Term Deposits in line with the Banks’ Long-Term Senior Debt, which is at the same level as the Banks’ Intrinsic Assessment (IA).

Concurrently, DBRS also upgraded the Short-Term Deposits of: 1) Banco Comercial Português, S.A and its branch, BCP Macao Branch, 2) Caixa Económica Montepio Geral (Banco Montepio), 3) Caixa Geral de Depósitos, S.A. and its branch, CGD France Branch. The Short-Term Deposit ratings of Novo Banco remained unchanged, in line with DBRS’ Short-Term / Long-Term Mapping Table.

The Trend on the Deposit ratings of Caixa Geral de Depósitos, S.A. will change to Stable from Positive, as they are now positioned at the same level as the Portuguese Sovereign ratings (BBB / R-2 (high), Stable Trend). The Trend on the Short-Term Deposits of Caixa Económica Montepio Geral (Banco Montepio) is now Negative in line with DBRS’ Short-Term / Long-Term Mapping Table. The Trend on all other Deposit ratings remains unchanged.

The Deposit ratings of Banco Santander Totta S.A. are not affected by this rating action as the ratings of the Bank’s Long-Term and Short-Term Deposits already incorporate rating uplift due to parental support from Banco Santander SA.

The aim of the new category of liability instruments (Senior Non-Preferred) is to facilitate the implementation of bank resolution procedures. In DBRS’s view, the issuance of Senior Non-Preferred bonds will increase the loss-absorbing capacity and support Portuguese banks in meeting their future MREL requirements. Typically, DBRS rates Senior Non-preferred instruments one notch below the Intrinsic Assessment.

RATING DRIVERS
The ratings of the Long-Term and Short-Term Deposits will generally be affected by changes in the IA of the individual banks. Furthermore, the ratings could also be affected by any further changes in the legal framework for bank resolution and / or creditor hierarchy.

Notes:
All figures are in Euros unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (July 2018). This can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include Portuguese Legislation (No. 23/2019), company documentation and financials, and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve-month period. DBRS’s outlooks and ratings are under regular surveillance.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Banco Comercial Português, S.A
Lead Analyst: Nicola De Caro, Senior Vice President, Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: June 10, 2011
Most Recent Rating Update: June 15, 2018

Caixa Económica Montepio Geral (Banco Montepio)
Lead Analyst: Nicola De Caro, Senior Vice President, Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: June 27, 2011
Most Recent Rating Update: October 1, 2018

Caixa Geral de Depósitos, S.A.
Lead Analyst: Nicola De Caro, Senior Vice President, Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: December 23, 2012
Most Recent Rating Update: June 4, 2018

Novo Banco, S.A.
Lead Analyst: Nicola De Caro, Senior Vice President, Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG
Initial Rating Date: August 5, 2014
Most Recent Rating Update: May 3, 2018

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