DBRS Upgrades BNP Paribas Fortis Bank (former Fortis Bank SA/NV) to R-1 (high), Trend Negative

DBRS, Inc. (DBRS) has today upgraded the R-1 (middle) short-term rating of BNP Paribas Fortis SA/NV (BNPP Fortis or the Bank) to R-1 (high). The Bank changed its legal name from Fortis Bank SA/NV to BNP Paribas Fortis SA/NV in January 2013, shortly after it completed the process of integration with BNP Paribas (BNPP, or the Group). In 2009, Fortis Bank already began to use the name BNP Paribas Fortis as a commercial name.

DBRS rates BNPP Fortis’s Short-term Obligations at R-1 (high) with a Negative trend. DBRS views BNPP Fortis as a core component of BNP Paribas’ retail franchise and, therefore, DBRS has assigned a support assessment of SA1 to BNPP Fortis. The SA1 designation implies strong and predictable support from the parent, BNPP.

The Negative Trend is in line with the Group and reflects the downside risks inherent in the economic slowdown and still stressed financial markets, combined with the challenges the Group faces in improving its operating efficiency, enhancing its international operations, and adapting its investment banking activities, while making more effective use of its balance sheet and coping with regulatory and legislative uncertainty.

The Bank’s rating also takes into account BNPP Fortis’s very well-positioned banking franchise in Belgium, which has largely generated positive earnings since its acquisition by BNPP, and its position as a direct subsidiary of BNPP. As the largest bank in Belgium with approximately EUR 272 billion in total assets, BNPP Fortis is well-positioned with market shares of around 20% when measured by total assets. The Bank’s rating also reflects the Bank’s underlying financial strength and earnings power that have enabled it to cope with the impact of disrupted financial markets. The Bank benefits from its key position in the Group. At the same time, the Bank’s capital position is solid, and it maintains strong liquidity that reflects its extensive retail deposit network and management of its wholesale banking activities.

The level of the Short-Term rating reflects the Bank’s important role and DBRS’s expectation that BNPP has the resources and motivation to support BNPP Fortis, if needed. DBRS also notes that 25% of BNPP Fortis is owned by the Federal Holding and Investment Company (or SFPI, the acronym of the French name), that manages equity holdings for the Belgian State. DBRS would view the Belgian government as committed to supporting its largest banks, including BNPP Fortis. DBRS rates the Kingdom of Belgium at AA (high) with a Negative trend.

Notes:
All figures are 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 and DBRS Criteria: Rating Bank Subordinated Debt and Hybrid Instruments with Discretionary Payments. These can be found at: http://www.dbrs.com/about/methodologies.

[Amended on January 12, 2015 to reflect actual methodologies used.]

The sources of information used for this rating include 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.

Lead Analyst: Roger Lister
Rating Committee Chair: Alan G. Reid
Initial Rating Date: 6 July 2005
Most Recent Rating Update: 8 October 2008

For further information on DBRS’ historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository see http://cerep.esma.europa.eu/cerep-web/

The conditions that lead to the assignment of a Negative or Positive Trend are generally resolved within a twelve month period. DBRS’s trends and ratings are constantly under surveillance.

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