DBRS Extends the Review of Novo Banco’s Ratings

DBRS Ratings Limited (DBRS) has extended the review on Novo Banco, S.A.’s (NB or the Bank) Long-Term Issuer, Long-Term Senior Debt and Long-Term Deposits ratings of CCC (high), and the Short-Term Issuer, Short-Term Debt and Short-Term Deposits ratings at R-5. These ratings remain Under Review with Positive Implications (URP). The review on the ratings was originally initiated on October 17, 2017, following the announcement of the results of a Liability Management Exercise (LME) to the bondholders of senior debt. At the same time, DBRS has confirmed the Critical Obligations Ratings (COR) at BB (low) / R-4, with Stable Trend. As a result of the extension of the review, the existing ratings are confirmed. Please see full ratings table at the end of this press release.

DBRS expects to conclude the review after the Bank presents YE2017 results, which is expected to be completed in less than three months. The review will focus on the impact of any potential changes in the Bank’s fundamentals and strategy as a result of the acquisition by Lone Star, including the EUR 1 billion capital injected in 4Q17.

DBRS has confirmed NB’s COR at BB (low) / R-4, with a Stable Trend. The confirmation reflects DBRS’ expectation that, in the event of a resolution of the Bank, certain liabilities related to critical activities (such as payment and collection services, obligations under covered bond program, payment and collection services, etc.) have a greater probability of avoiding being bailed-in and would be included in a going-concern entity.

RATING DRIVERS
All ratings except the Long-term/Short-term COR are currently Under Review with Positive Implications. During this period, DBRS will review potential implications for NB’s capital and asset quality as a result of the acquisition by Lone Star and the EUR 1 billion capital injected in 4Q17.

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (May 2017) and DBRS Criteria: Guarantees and Other Forms of Support (February 2017). This can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include SNL Financial, company disclosures and the Bank of Portugal. DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This rating is under review. Generally, the conditions that lead to the assignment of reviews are resolved within a 90 day period. DBRS reviews and ratings are under regular surveillance.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Maria Rivas, Vice President – Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG, Global FIG
Initial Rating Date: 5 August 2014
Most Recent Rating Update: 17 October 2017

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