Credit Opinion: BNP Paribas
Global Credit Rearch - 30 Dec 2011
Paris, France
Ratings
Category
紫苏的功效Moody's Rating Outlook Negative(m)Bank Deposits Aa3/P-1Bank Financial Strength C Baline Credit Asssment (A3)Adjusted Baline Credit Asssment (A3)Issuer Rating Aa3Senior Uncured -Fgn Curr Aa3Senior Uncured -Dom Curr Aa3Subordinate -Fgn Curr *Baa1Subordinate -Dom Curr *A1Jr Subordinate MTN -Dom Curr *(P)Baa1Pref. Stock Non-cumulative Baa3 (hyb)Other Short T erm -Fgn Curr (P)P-1Other Short T erm -Dom Curr P-1
* Placed under review for possible downgrade on December 9, 2011
Contacts
Analyst
Phone Nicholas Hill/Paris 33.1.53.30.10.20Andrea Usai/London 44.20.7772.5454Carola Schuler/Frankfurt am Main 49.69.707.30.700Roland Auquier/Paris
Key Indicators
BNP Paribas (Consolidated Financials)[1]
产品工程师[2]12-10[2]12-09[2]12-08[3]12-07[3]12-06A vg.T otal Asts (EUR million)
19981582057698207555116944541440343[4]8.5Net Interest Margin (%)
1.26% 1.08%0.77%0.67%0.68%[5]0.9%PPI / Avg RWA (%)
2.88%
3.13% 1.77% 2.49% 2.38%[6]2.6%Net Income / Avg RWA (%)
1.50% 1.22%0.67% 1.70% 1.72%[6]1.1%(Market Funds - Liquid Asts) / T otal Asts (%) 1.15% 1.17% 1.04%
2.41% 4.21%[5]2,0%Core Deposits / Average Gross Loans (%)81.80%94.26%85.12%79.70%72.95%[5]82.8%
Tier 1 Ratio (%)11.40%10.10%7.90%7.30%7.40%[6]9.8%
T angible Common Equity / RWA (%)9.44%8.01% 6.69% 6.68% 6.50%[6]8.0% Cost / Income Ratio (%)60.14%57.83%66.24%60.07%60.71%[5]61,0% Problem Loans / Gross Loans (%) 5.89% 5.42% 4.43% 3.96% 4.81%[5]4.9%
39.80%38.75%31.09%25.42%30.22%[5]33.1% Problem Loans / (Equity + Loan Loss Rerves)
(%)
[1] All ratios are adjusted using Moody's standard adjustments [2] Bal II; IFRS [3] Bal I; IFRS [4] Compound Annual Growth Rate bad on IFRS reporting periods [5] Bal II & IFRS reporting periods have been ud for average calculation [6] IFRS reporting periods have been ud for average calculation
Opinion
RECENT CREDIT DEVELOPMENTS
On 9 December 2011, Moody's Investors Service downgraded the standalone bank financial strength rating (BFSR) of BNP Paribas (BNPP) by two notches to C from B- (now mapping to A3 on the long-term scale from A1 previously) and the long-term debt and deposit ratings by one notch to Aa3. The outlooks on the BFSR and long-term ratings are negative, while the Prime-1 short-term rating was affirmed.
The one-notch downgrade of the long-term debt and deposit ratings to Aa3 follows the downgrade of the BFSR. The long-term ratings now incorporate three notches of systemic support (previously two notches), derived from our view that the probability of systemic support for BNPP remains very high. The rating actions conclude the review initiated on 15 June 2011 and extended on 14 September 2011. The lower BFSR reflects our view that BNPP's liquidity and funding constraints are now offtting its previous, prevailing credit-positive factors (such as high diversification, strong franchi, stable earnings). For more details, plea refer to our press relea "Moody's downgrades BNP Paribas's long-term ratings to Aa3, concluding review", dated 9 December 2011.
Dated subordinated debt curities were also downgraded by one notch to A1 and remain on review for downgrade pending our reasssment of systemic support for such debt, initiated on 28 November 2011. This rating action was part of a wider action on subordinated debt issued by a num
ber of European financial institutions. This review will contemplate the potential complete removal of systemic support from our ratings on subordinated debt, where the ratings currently incorporate such support. This reflects Moody's belief that the probability of subordinated bank debt in Europe benefiting from systemic support will be lower than assumed in the past, further to possible legislative changes, including the European Commission's propod framework on resolution regimes, which would allow the imposition of loss on subordinated debt holders outside a bankruptcy. In countries where this is already the ca, such as the UK and Germany, our approach is to notch down subordinated debt curities from the institution's Adjusted Baline Credit Asssment. For more details on the wider rating action, plea refer to Moody's Press Relea "Moody's Reviews Bank Hybrids, Subordinated Debt for Downgrade" and Special Comment "Reasssment of Government Support Assumptions in European Bank Subordinated Debt", both dated 28 November 2011.
SUMMARY RA TING RA TIONALE
The C BFSR, equivalent to A3 on the long-term scale, reflects our view that BNPP's liquidity and funding constraints are now offtting its previously prevailing credit-positive factors (such as high diversification, strong franchi, stable earnings). In particular, the following considerations have res离别家乡岁月多
ulted in the current C BFSR:
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(1) Liquidity and funding conditions have deteriorated significantly for BNPP, which has historically made
significant u of wholesale funding markets. The probability that the bank will face further funding pressures has rin in line with the worning European debt crisis.
(2) BNPP's deleveraging plan will likely help somewhat reduce its need for wholesale funding. However, given that many other banks in Europe are engaged in similar programmes, there is a mounting risk that the resulting ast sales could be executed at a discount to par, and therefore be detrimental for capital.
(3) BNPP retains significant, albeit reduced, exposures to sovereigns and their economies that are themlves experiencing tighter refinancing conditions and declining creditworthiness, notably Italy, which in turn expo the bank to heightened credit and liquidity risks.
酒吧服务生BNPP still benefits from a broad array of business, most of which have substantial scale and strong franchis in their own right. Activities are well spread, ranging from retail and commercial bra
nch network banking, consumer credit, leasing and equipment finance, ast management, private banking and insurance, and corporate and investment banking. Geographically the heart of BNPP's business remains in France, but its activities fan out across much of the euro area through banks in Belgium and Italy, and indeed across the world.
Up until the summer of 2011, BNPP had weathered the financial crisis relatively well compared to many international peers. Although by no means immune, BNPP was generally able to absorb loss more comfortably than some other large banks, thanks to a relatively diversified stream of earnings, both geographically and by business line, enabling it to expand its franchi with the opportunistic acquisition of Fortis Bank SA / NV in 2009. Like many banks, BNPP has sought to enhance its capitalization in respon to fragile funding markets and regulatory change. Its common equity Tier 1 ratio was 9.6% at end-September 2011, up from about 5.6% at the start of 2008. In addition it has been growing its deposit ba and lengthening its market funding.
Our BFSR of C incorporates the strengths. It also reflects a number of challenges for the bank. Most notably, since mid-2011, as the sovereign crisis in the euro area has deepened, the bank has been affected more than many others and has written down its sizeable Greek debt to 40% of par. Even so, BNPP posted a net profit of EUR541 million in the third quarter of 2011, down 72% from EU
R1,905 million in the third quarter of 2010. Yet it has also en a material outflow of wholesale funds, of which the majority was short term is US dollar, and the bank is accordingly engaged in adapting its business model to adjust to the new funding constraints. As this involves a certain amount of deleveraging, this brings the risk that the disposal of asts ahead of their contractual maturity generates greater-than-expected loss. In addition, the capital markets business is large and volatile compared to the retail and commercial banking business, contributing about 20% of pre-tax profit to the group in the first nine months of 2011. Although risks have reportedly been reduced since the financial crisis, outstanding credit market asts have reduced, and value at risk has fallen, in common with similar activities at other banks this remains a relatively opaque activity. In addition we e credit challenges in the integration of Fortis Bank SA / NV, and the inherent difficulty in managing a bank of such size and diversity.
Our ratings further incorporate the probability of support from the French state in ca of need, and as evidenced during the financial crisis when French banks received government capital (all of which has since been repaid). While systemic support is coming under pressure for all European Union countries, we still believe that France remains by inclination a high support country. This results in three notches of systemic support and a long-term debt and deposit rating of Aa3.
Credit Strengths
- Strong geographic and business diversification
圣诞节怎么过- Well-established franchis in retail and SME banking in France, Belgium and Italy, as well as in other lected markets
- Leading positions in European consumer finance, leasing and curities rvices
- Key player in equity derivatives and project finance globally, and fixed income in Europe
- Leading European ast management franchi
Credit Challenges
- Large absolute short-term funding requirements and conquent vulnerability to financing market disruptions
- Incread sovereign risk in the euro area and large exposures to bonds of heavily indebted euro area countries and more generally, deteriorating macro economic environment in the euro area
-
Earnings volatility arising from capital markets activities
- Complex risk profile in capital markets trading and structuring business
Rating Outlook
The outlook on the BFSR is negative, following Moody's view that financing conditions in the euro area sovereign debt and banking markets remain poor, while macroeconomic conditions are deteriorating. The outlook on the long-term debt and deposit ratings of BNPP is also negative, in line with the outlook on the BFSR according to our Joint-Default Analysis (JDA) methodology.
What Could Change the Rating - Up
Given the negative outlook on the BFSR and long-term ratings, the probability of an upgrade in either is unlikely.
What Could Change the Rating - Down
The main factors that could lead us to lower our long-term ratings include:
-
- Any broader reappraisal of the implications of the highly fragile funding environment for banks that are reliant on wholesale funding and vulnerable to a loss of investor confidence;
-- A deterioration in sovereign creditworthiness, especially of Italy and Belgium;
-- An increa in our expectation of loss resulting from deleveraging;医保管理制度
-- An inability to meet capital targets;
-- Unexpected loss within the capital markets activity;
-- A further material increa in the probability of a recession leading to higher credit loss; and
-- A deterioration in the creditworthiness of the support provider, France, or its ability and/or willingness to provide support to the benefit of creditors.
Recent Results and Company Events
BNPP reported net income of EUR541 million in Q3 2011, down 72% from Q3 2010, due to the EUR2.1 billion impact on cost of risk of Greek debt provisioning, which was raid to 60% of total exposure after EU authorities formulated a new Greek assistance package on 27 October 2011.
Revenues for the first nine months of 2011 were down 2.6% compared to the year before, while impairment charges were up 45% year-over-year, although this included EUR2.675 billion of provisions on Greek government bonds. BNPP had total asts of EUR1,926 billion at end-June 2011, a common equity Tier 1 ratio of 9.6% and a Tier 1 ratio of 11.9% at end-September 2011. The common equity ratio has since been further enhanced by the buyback of certain hybrid capital curities. The group reported EUR150 billion of central bank eligible collateral as of mid-July 2011.
On 8 December 2011, the European Banking Authority (EBA) published the revid results of its stress test, to which BNPP was subject, along with 65 other banks. We note that the information disclod to us by BNPP as part of the EBA exerci is in line with information available to us, and as such, the ratings for BNPP were unaffected by the EBA test and related disclosures.
The EBA ts a target Core Tier 1 ratio of 9% under so-called Bal 2.5 (CRD 3) which includes higher capital charges for market risk and a buffer against sovereign risk, to be attained by 30 June 2012. BNPP has a core Tier 1 capital shortfall of EUR1.5 billion on this basis. The bank expects to attain the target through their leveraging plan, although Moody's cautions that the resulting ast sales could be executed at a discount to par, and therefore be detrimental for capital.
DETAILED RA TING CONSIDERA TIONS
Detailed considerations for BNPP's currently assigned ratings are bad on the latest annual and interim financial reports available. What's more, the quantitative scores are bad on the three-year averages for the years 2008-2010.
Bank Financial Strength Rating我的理想演讲稿
Moody's assigns a C BFSR to BNPP, which maps into a Baline Credit Asssment of A3, which is in line with the outcome of the scorecard.
Qualitative Factors (50%)
Franchi Value
Trend: Neutral
BNPP is one of the world's largest banks and benefits from a strong franchi, as evidenced by high geographic diversification across countries with relatively uncorrelated economies. BNPP has a strong domestic retail positioning in France, with a particularly strong foothold in the Paris region, and we do not expect any weakening in the domestic franchi in the foreeable future. The bank also has stable retail and commercial franchis abroad including BancWest in the USA, BNL in Italy,
Fortis in Belgium, and operations in North Africa and Eastern Europe. In addition, BNPP has substantial scale business operating both within and beyond Europe in consumer finance, leasing, factoring and equipment finance. Moreover it has strong positions in corporate and institutional business such as project finance, fixed income, commodities finance, and derivatives, as well as ast management, private banking, insurance, and curities rvices.
Moody's views favorably the sound diversification amongst all business lines as well as geographically, but notes the relatively high proportion of revenues linked to more volatile activities, notably in the corporate and investment banking arena. The advisory and capital markets activity contributed to 15% to group revenues and 20% to pretax income in the first nine months of 2011.
Moody's notes that BNPP, which has historically made significant u of wholesale funding markets, now faces increasing refinancing pressure which is underscored by the bank's announcement of a deleveraging plan, aimed at reducing around EUR70 billion of risk-weighted asts (RWA) by the end of 2012. This reduction focus on US dollar asts, reflecting the particular difficulty in sourcing term US
