Banif – Banco Internacional do Funchal, S.A. is rated by two main rating agencies - Moody´s and Fitch Ratings.
In April 2009, against a backdrop of severe economic contraction, Moody´s took action on Portuguese banks and downgraded Banif´s rating to Baa1/P-2. In July 2010, Moody’s downgraded the Portuguese Republic from Aa2 to A1, due to the deterioration in the country’s economic and debt fundamentals: as a result, Banif’s ratings moved from Baa1/P-2 to Baa3/P-3, with a Negative outlook.
In 2011, the escalation in the Greek debt crisis and its potential impact on the banking sector led Moody’s to revise the rationale underlying the concept of ‘banking systemic support’, affecting the BFRSs of most European banks. On the other hand, the fast deterioration in market conditions and lack of access to market funding at reasonable rates led Portugal to apply for a bailout program from the IMF, EU and ECB. Against this backdrop, Moody’s further downgraded the rating of the Republic of Portugal – in March from A1 to A3 with Negative outlook, in April from A3 to Baa1 with Negative outlook, and in July from Baa1 to Ba2 with Negative outlook. The immediate consequence was further revisions to the Portuguese banking sector, with Banif’s rating downgraded twice: in June from Baa3/p-3 to Ba2/NP and in July to Ba3/NP with Negative outlook.
In February 13, 2012 Moody´s downgraded the sovereign debt ratings of selected EU countries, among them Portugal from Ba2 to Ba3, in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries' own specific challenges. On the February 15th, Moody´s announced it was placing the rating of the Portuguese banks under review for possible downgrade.
On the March 28th, Moody´s downgraded the ratings of five banks, including Banif, moving from Ba3/NP to B1/NP, with Negative outlook.
In March 2010, Fitch downgraded Portugal from AA to AA- with a Negative outlook, reflecting the agency’s concern over “the potential impact of the global economic crisis on Portugal’s economy and public finances, giving the existing structural weaknesses and high indebtedness across all sectors of the economy”.
Following the downgrade of Portugal and the closure of the capital markets, which limited the banks’ funding sources, in July the agency downgraded the rating of some Portuguese banks, amongst them Banif, to BBB/F3 with Negative outlook. In November, Fitch again downgraded Portugal from AA- to A+ with Negative outlook. In March 2011, Fitch took another rating action on Portugal following the sovereign and political crises, downgrading the Republic from A- from A+ with Negative outlook. Shortly afterwards, in April, Fitch again downgraded Portugal by three notches due to concerns triggered by the political crisis and the potential need for external support. As a result, the ratings of Portuguese banks were also downgraded, reflecting Fitch’s view that “the pressure on Portuguese banks will intensify as access to wholesale markets could be further constrained or fully closed for a period of time, which may force the banks to recourse to the ECB for funding to meet short and medium term refinancing needs”. Banif’s ratings were downgraded from BBB-/F3 to BB/B, with a Stable outlook.
In the 4th quarter of 2011, Fitch upgraded its rating scale and system by introducing Viability Ratings (VRs), which were designed to be internationally comparable, representing the intrinsic creditworthiness of an issuer. As such, VRs reflect the capacity of the bank to maintain ongoing operations and to avoid failure, the latter being indicated by extraordinary and company specific measures becoming necessary to protect against a bank's default.
Based on this new methodology, in October, Fitch announced the downgrade of six Portuguese banks VRs, maintaining IDRs on Rating Watch Negative (RWN) ratings, due to “intensified funding and liquidity tensions and the deterioration in asset quality”. Consequently, Banif’s long term and short term ratings were affirmed at BB/B with a Stable outlook, while the short term IDR was affirmed at B and the VR was downgraded to b+ from bb.
In November, Fitch downgraded Portugal once more from BBB- to BB+ with Negative Outlook. Following this action, the agency took action on Portuguese banks ratings and affirmed Banif’s long term and short term ratings at BB/B, changing the outlook to Negative but placing the VR at b+ RWN.
On December 23, Fitch concluded its review of the banks following the Republic’s downgrade, having downgraded Banif’s VR to b-.
|Rating Agency ||Long Term ||Short Term ||Outlook |
|Moody's ||B1||NP ||Negative|
|Fitch IBCA ||BB||B ||Stable|