DBRS Upgrades LT Ratings of Santander Totta to A (low), Stb trend following Santander Confirm at “A”

DBRS, Inc. (DBRS) has upgraded the long-term ratings of Banco Santander Totta S.A. (Totta or the Bank) following the confirmation of its parent, Banco Santander S.A. (Santander or the Parent). DBRS has upgraded Totta’s Long-Term Issuer Rating to A (low) from BBB (high), while its Short-Term Issuer Rating was confirmed at R-1 (low). The long-term ratings are now positioned one-notch below those of Santander. The trend on all ratings remains Stable, in line with the rating of the Parent. Totta’s support assessment remains SA1.

These rating actions follow DBRS’s confirmation of Santander’s senior long-term ratings at “A”, with a Stable trend. The SA1 designation implies strong and predictable support from the Parent, and Totta’s rating will generally move in tandem with Santander’s long-term debt ratings. The SA1 designation considers Totta’s important role as a core component of Santander’s international franchise and DBRS’s expectation that Santander has the willingness and ability to support Totta, if needed. With the acquisition of Banco Popular Portugal S.A., DBRS sees Santander as further enhancing its position in a core market, while also solidifying its position as the #2 bank in Portugal. DBRS assumes that support from the Parent would be forthcoming for Totta in a timely manner, as the reputational consequences for Santander of any perceived lack of support would be substantial.

Prior to the upgrade of Totta’s ratings, DBRS had incorporated a two-notch differential between Totta’s long-term ratings and those of Santander reflecting the risks associated with rating a bank subsidiary in a foreign country, particularly a lower-rated country. The upgrade of Totta’s long-term ratings reflects DBRS’s view that stabilization of the banking environment in Portugal allows for the rating to revert to a more typical one-notch differential between subsidiary and parent, particularly given the growing importance of the subsidiary to the Parent.

RATING DRIVERS
Positive rating pressure would likely be linked to improvement in Santander’s long-term debt ratings. Alternatively, a downgrade of Santander’s ratings would also likely negatively impact Totta’s ratings.

Any indication of a reduction of support from the Parent could impact DBRS’s support assessment, and potentially have a negative impact on Totta’s ratings.

Notes:
All figures are in EUR unless otherwise noted.

The applicable methodologies are the Global Methodology for Rating Banks and Banking Organisations (May 2017), and DBRS Criteria: Guarantees and Other Forms of Support (February 2017), which can be found on our website under Methodologies.

The primary sources of information used for this rating include company documents and SNL Financial, company reports, Bank of Portugal, European Banking Authority (EBA) and European Central Bank (ECB). 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: Lisa Kwasnowski, Senior Vice President - Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG, Global
Initial Rating Date: October 11, 2006
Most Recent Rating Update: July 14, 2017

The rated entity or its related entities did participate in the rating process. DBRS did have access to the accounts and other relevant internal documents of the rated entity or its related entities.

For more information on this credit or on this industry, visit www.dbrs.com.