DBRS Assigns Ratings to Certain Debt Instruments of Bankia

DBRS Ratings GmbH (DBRS) assigned ratings to Bankia SA’s (Bankia or the Bank) Senior Non-Preferred Debt at BBB and Subordinated Debt at BBB (low). These instruments are included in the Bank’s EUR 30 billion “Folleto Base de Valores no Participativos” dated July 19, 2018 and the EUR 10 billion “Folleto EMTN Bankia 2018” dated July 6, 2018 (the Programmes). At the same time, DBRS assigned a BB (low) rating to the Additional Tier 1 (AT1) Instruments of Bankia. All ratings have a Stable Trend. A full list of rating actions is included at the end of this press release.

In line with the Debt Obligations Framework set out in DBRS’s Global Methodology for Rating Banks and Banking Organisations (July 2018), Senior Non-Preferred Debt issued under the Programmes, will be rated one notch below the Bank’s Long-Term Issuer Rating and Intrinsic Assessment (IA) of BBB (high). The Subordinated Debt issued under the Programmes will be rated two notches below Bankia’s IA.

In assigning the BB (low) rating to the AT1 Instruments, five notches below the Bank’s IA of BBB (high), DBRS highlights that the AT1 obligations are deeply subordinated and constitute the most junior debt instruments of the Bank. They are perpetual in tenor and can be converted if the Issuer or Regulator determines there is a Trigger Event. The trigger level for conversion is set at a minimum Common Equity Tier 1 (CET1) ratio for Bankia of 5.125%. While the instruments can be converted at the full discretion of the Bank, there are required conditions of positive and distributable net income which need to be met. Bankia can cancel interest payments on the AT1 Instruments in part or in total and under some circumstances may be required to cancel interest payments.

The rating incorporates the probability of the Bank tripping the capital trigger. In the case of Bankia the notching from the IA takes into consideration the sizeable buffer of 7.485% between the 5.125% trigger point and the Bank’s 12.61% fully loaded CET1 ratio (or 3.36% above the minimum CET1 9.25% under the SSM SREP 2019). It also takes into account the Bank’s BBB (high) IA. For more detail on DBRS’s approach, see Global Methodology for Rating Banks and Banking Organisations (July 2018).

RATING DRIVERS
Any positive change in the Bank’s Intrinsic Assessment would have positive implications for the Senior Non-Preferred Debt, Subordinated Debt and Additional Tier 1 Instruments ratings.

Similarly, any negative change in the Bank’s Intrinsic Assessment would have negative implications for the ratings.

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 at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include SNL Financial, company disclosures, Bank of Spain, and the European Banking Authority (EBA). DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

This is the first DBRS rating on this financial instrument.
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.

Lead Analyst: Arnaud Journois, Vice President, Global FIG
Rating Committee Chair: Ross Abercromby – Managing Director – Global FIG
Initial Rating Date: July 8, 2016
Most Recent Rating Update: July 4, 2018

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Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.