Fitch Rates Caixa Geral's AT1 Notes Final 'B-'
(The following statement was released by the rating agency) BARCELONA, April 05 (Fitch) Fitch Ratings has assigned Caixa Geral de Depositos, S.A.'s (CGD, BB-/Stable/B/bb-) EUR500 million additional Tier 1 (AT1) capital notes a final rating of 'B-'. The notes have a 10.75% coupon for the first five years. The final rating is in line with the expected rating Fitch assigned to the notes on 16 March 2017 (see "Fitch Rates Caixa Geral's AT1 Notes 'B-(EXP)'" at www.fitchratings.com). KEY RATING DRIVERS The notes are CRD IV-compliant perpetual, deeply subordinated, fixed-rate reset AT1 debt securities. The notes have fully discretionary interest payments and are subject to partial or full write-down if the consolidated or unconsolidated common equity Tier 1 (CET1) ratio of CGD falls below 5.125%. The write-down could be reversed under certain conditions and at the discretion of the bank. The rating assigned to the securities is three notches below CGD's 'bb-' Viability Rating (VR), in accordance with Fitch's criteria for assigning ratings to hybrid instruments. The notching reflects higher expected loss severity relative to senior unsecured creditors and higher non-performance risk. Non-performance risk reflects the full discretionary coupon payment. CGD has estimated its distributable reserves at EUR1.8 billion after the capital reduction of 4 January 2017. Fitch expects the non-payment of interest on this instrument will occur before it breaches the notes' 5.125% CET1 trigger level, when CGD's capital ratio approaches its Supervisory Review and Evaluation Process requirement set at 8.25% for 2017. CGD's pro-forma end-2016 phase-in CET1 ratio was 12% on a consolidated and 13.7% on an unconsolidated basis, which provide it with a buffer from the equity conversion trigger level. The principal write-down can be reinstated and written up at full discretion of the issuer if positive net income (unconsolidated or consolidated) is recorded. RATING SENSITIVITIES The AT1 notes' rating is primarily sensitive to changes in CGD's VR. The rating is also sensitive to changes in the notes' notching from CGD's VR, which could arise if Fitch changes its assessment of the probability of the notes' non-performance relative to the risk captured in the VR. This may reflect a change in capital management in the group or an unexpected shift in regulatory buffer requirements, for example. Under Fitch's criteria, a one-notch upgrade of the AT1 instrument would be conditional upon a two-notch upgrade of CGD's VR. Date of the relevant committee: 15 March 2017 Contact: Primary Analyst Josu Fabo, CFA Director +34 93 494 3464 Fitch Ratings Espana, S.A.U. Av. 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