DBRS Downgrades Santander Totta to BBB (high) After Downgrade of Santander, Trend Now Neg.

DBRS, Inc. (DBRS) has today downgraded the ratings of Banco Santander Totta S.A. (Totta or the Bank) following the downgrade of its parent, Banco Santander S.A. (Santander or the Parent). DBRS has downgraded Totta’s Senior Unsecured Long-Term Debt & Deposit rating to BBB (high) from A (low). At the same time, DBRS has confirmed the Group’s Short-Term Debt & Deposit rating at R-1 (low). The trend on all ratings is now Negative. The aforementioned ratings have been removed from Under Review with Negative Implications, where they were placed on 18 July 2012 when DBRS initiated ratings coverage of Totta.

These rating actions follow DBRS’s downgrade of Santander to “A” from A (high). Santander’s ratings have been removed from Under Review with Negative Implications; the trend is now Negative. DBRS maintains its SA1 support assessment for Totta. The SA1 designation implies strong and predictable support from the Parent. As a supported rating with an SA1 designation, Totta’s rating will generally move in tandem with Santander’s long-term debt ratings.

The ratings of Totta reflect its important role as a core component of Santander’s international franchise and DBRS’s expectation that Santander has the resources and motivation to support Totta, if needed. The two notch differential between Totta’s long-term debt rating of BBB (high) and Santander’s long-term debt rating of “A” reflects the risks associated with rating a bank subsidiary in foreign country, particularly a lower-rated country. DBRS rates the Republic of Portugal at BBB (low). The Republic of Portugal’s long-term foreign and local currency ratings remain Under Review with Negative Implications, where they were placed on 22 May 2012. DBRS has recently announced the extension of its review on Portugal’s ratings given the unusually high degree of uncertainty regarding Portugal’s growth outlook, which is essential for debt stabilization. DBRS views the increased risks associated with the lower rating of the Republic of Portugal as appropriately reflected in the two notch ratings differential between the Parent and Totta. Without parental support, Totta’s ratings would be significantly lower.

Notes:
All figures are in 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.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

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