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Fitch upgrades Fortis Bank and BGL to AA- on BNPP acquisition.

Byline: (Staff Writer)

Fitch said it has upgraded Fortis Bank's and BGL SA's long-term Issuer Default Ratings (IDRs) to AA- from A+ and removed them from Rating Watch Positive (RWP) following the purchase of majority stakes in these banks by BNP Paribas (BNPP; rated 'AA'/'F1+'/Outlook Negative).

The outlooks on Fortis Bank's and BGL SA's Long-term IDRs are Negative. At the same time, the banks' individual ratings have been upgraded to D from F. The short-term IDRs of both Fortis Bank and BGL SA have been affirmed at F1+.

Fitch said the upgrade of the long-term IDRs reflects the completion of the takeover of both banks by BNPP which resulted in the French bank now holding 75 per cent of Fortis Bank (the remaining being in the hands of the Belgian government) and 66 per cent of BGL SA (16 per cent directly and 50 per cent through Fortis Bank, the residual 34 per cent being held by the Luxembourg government).

Accordingly, Fitch said it considers that there is an extremely high probability that BNPP would provide support to these strategically important subsidiaries, in case of need. This assumption drives Fortis Bank's and BGL SA's long- and short-term IDRs and support rating.

Fitch claims that BNPP's move into the Belgian and Luxembourg markets will allow the French bank to roll out its business model in two more retail markets and strengthen its franchise in asset management and private banking. The negative outlook on Fortis Bank and BGL SA is a reflection of the negative outlook on BNPP

The upgrade of the Individual ratings reflects Fitch's view that while the banks are still facing a number of challenges, they are now not expected to require additional external support. The Individual ratings could be reviewed once the new business and risk profiles are detailed. Fitch expects BNPP will manage well the integration of Fortis Bank and BGL SA, which should help consolidate their sound franchises in their respective markets.

Fortis Bank's hybrids securities have been upgraded to A+ from BB-, with the exception of a convertible and subordinated hybrid equity-linked instrument (CASHES), whose CCC rating remains on Rating Watch Evolving. The reduced notching of the hybrid securities compared to the bank's IDR reflects Fitch's expectation that these securities would also benefit from support from the parent, in case of need.

Fortis Bank's and BGL SA's Support Rating Floors of A+ have been withdrawn since Fitch now expects that, if needed, support will come from BNPP rather than the Belgian and Luxembourg states respectively.

According to Fitch's rating definitions, the individual rating reflects the standalone strength of a bank, while the support rating reflects the probability of support from a major shareholder and/or the state.

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Publication:CPI Financial
Date:May 18, 2009
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