DBRS Lowers Banco Espírito Santo to BBB (low) After Downgrade of Portugal to BBB (low)

DBRS, Inc. (DBRS) has today downgraded the ratings of Banco Espírito Santo, S.A. (BES or the Group) following the downgrade of the Republic of Portugal. DBRS has downgraded BES’s Senior Long-Term Debt & Deposit rating to BBB (low) from BBB and the Short-Term Debt & Deposit rating to R-2 (mid) from R-2 (high).The trend on all ratings remains Negative. These rating actions follow DBRS’s downgrade of the Republic of Portugal to BBB (low) from BBB, with the trend remaining Negative.

In light of this sovereign rating action, upcoming bank earnings, and the condition of the financial sector, DBRS will continue to evaluate the intrinsic strength of the Group. DBRS maintains its SA-2 support assessment for BES, which indicates an expectation of timely systemic support in case of need. However, with the current rating for the Portuguese sovereign at BBB (low), which is below the intrinsic assessment for BES, there is currently no uplift to the Group’s ratings.

DBRS has also assigned new ratings for subordinated debt at several of BES’s branches. DBRS assigned Dated Subordinated Notes ratings of BB (high) to BES Madeira Branch, BES London Branch and BES Cayman Islands Branch. The trend on these ratings is Negative. These ratings are subject to the maintenance of BES’s Senior Long-Term Debt & Deposit rating of BBB (low), Dated Subordinated Notes rating of BB (high), and Short-Term Debt & Deposit rating of R-2 (mid).

Notes:
All figures in Euros (EUR) unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations. Other methodologies used include the DBRS Criteria – Intrinsic and Support Assessments. Both can be found on the DBRS website under Methodologies.

The sources of information used for this rating include DBRS's rating action on the Republic of Portugal, company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Roger Lister
Rating Committee Chair: Alan G. Reid
Initial Rating Date: 19 April 2011
Most Recent Rating Update: 20 October 2011

This credit rating has been issued outside the European Union (EU) and may be used for regulatory purposes by financial institutions in the EU.

For additional information on this rating, please refer to the linking document under Related Research.