Press Release

DBRS Morningstar Confirms ICO’s Long-Term Ratings at A, Stable Trend

Banking Organizations
September 11, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed Instituto de Crédito Oficial’s (ICO or the Bank) ratings, including the Long-Term Issuer Rating at A and the Short-Term Issuer Rating at R-1 (low), with all trends at Stable. ICO’s Support Assessment remains SA1. See a full list of ratings at the end of this press release.


The confirmation of ICO’s Long-Term Issuer Rating at “A”, Stable trend follows DBRS Morningstar’s confirmation of the Kingdom of Spain’s Long-Term Foreign and Local Currency rating at “A” with a Stable trend on September 4, 2020. ICO’s ratings reflect its statutory ownership and the full guarantee of its liabilities by the Kingdom of Spain as stated in its by-laws. As a result, DBRS Morningstar’s support assessment for ICO is SA1 and ICO’s issuer ratings and trend are equalised with the ratings of the Kingdom of Spain and will move in line with the rating of the Spanish sovereign.


An upgrade on the Kingdom of Spain´s ratings would lead to an upgrade of ICO´s ratings. Similarly, a downgrade on the Kingdom of Spain´s ratings would lead to a downgrade of ICO´s ratings. The Long-Term and the Short-Term Trends move in line with the Trend of the Kingdom of Spain.


ICO is a credit institution by law and is considered to be a State Finance Agency of Spain. As a public specialised lending institution and the state’s financial agency, ICO enjoys a unique and dominant franchise in Spain. ICO´s role is to support and develop any economic activity contributing to the growth of the Spanish economy.

ICO´s operating environment has registered a significant deterioration under the coronavirus (COVID-19) pandemic, although the full impact for the Bank will likely emerge in the coming quarters. DBRS Morningstar’s macroeconomic scenarios consider a very significant recession in Spain. In order to contain the economic fallout, the Spanish authorities have announced support measures which affect ICO´s activity and risk profile. In this context, the Spanish government has approved a scheme of up to EUR 100 billion to cover liquidity needs for SMEs and Corporates. For SMEs, these instruments will cover up to 80% of the credit losses at the banks. The scheme has been rolled out in several tranches of EUR 20 billion. As of end-August 2020, around EUR 75 billion of guarantees have been allocated to banks. This scheme is managed by ICO but the guarantees are provided by the Spanish government; as a result, ICO does not bear the credit risk related to these guarantees. Moreover, DBRS Morningstar understands that this scheme has minimised ICO´s credit risk related to this crisis, as a part of their loans will also benefit from the guarantees. In addition, the Spanish government has also approved a new state guarantee loan scheme of up to EUR 40 billion to provide funding sources to new investment projects (Real Decreto-ley 25/2020, de 3 de julio). The scheme will be rolled out in tranches, with the first one of EUR 8 billion being available during the September 2020. As with the EUR 100 billion scheme, the EUR 40 billion scheme for investments is managed by ICO, but the guarantees are provided by the Spanish Government.
In carrying out its public service mandate, ICO’s goal is not to maximise profits, however the Bank has never reported a loss in its history. Nevertheless, given its countercyclical nature, profits have shown volatility over time. Morningstar views ICO’s earnings power as constrained by its weak operating margins, despite being partially off-set by its low cost base. The Bank’s net income totalled EUR 109 million in 2019, up from EUR 76 million in 2018. Both results were highly affected by the release of loan provisions of EUR 100 million and EUR 102 million in 2018 and 2019, respectively. DBRS Morningstar expects the Bank´s profitability to be negatively affected in coming quarters from the impact of the COVID-19 crisis, as loan loss provisions are expected to increase.

DBRS Morningstar views ICO’s risk appetite as generally conservative due to the nature of its activities. However, ICO´s credit profile is negatively affected by its high single-name concentrations. The Bank’s lending is carried out through two different channels: a) Indirect lending in which the Bank’s operates through credit lines to commercial banks that, in turn, lend the funds to SMEs/entrepreneurs. The indirect lending results in ICO having counterparty credit risk to the participating banks. ICO’s total indirect lending totaled EUR 9.4 billion at end-2019; b) Direct lending, which typically consists of providing syndicated loans to large companies or structured finance projects, either public or private, and represents around EUR 10.9 billion at end-2019.

The recent deleveraging of its balance sheet reflects the Bank’s countercyclical mission. However, DBRS Morningstar considers that in coming years ICO´s balance sheet will likely grow as the Bank will seek to improve funding access to SMEs and Corporates in the current challenging economic environment. Direct loans are the only contributor to the Bank’s level of NPLs, as the Bank does not bear the underlying credit risk for the indirect lending. The Bank’s NPL ratio decreased to 4.46% at end-2019 from 5.9% at end-2018 (as calculated by DBRS Morningstar), with gross NPLs totalling around EUR 488 million. The Bank’s coverage ratio for these NPLs remains very strong at 132% at end-2019 (as calculated by DBRS Morningstar and not including other provisions). DBRS Morningstar expects that the Bank will register an increase in NPLs in coming years due to the deterioration of the economic environment due to the COVID-19 situation.

ICO’s funding structure is reliant on wholesale funding and funding from multilateral development banks, mainly the European Investment Bank. The Bank has not experienced any notable difficulties in accessing the markets since its creation and has been able to tap the markets on a regular basis, even during the financial crisis and the current COVID-19 crisis. DBRS Morningstar views ICO’s capitalisation as robust. ICO’s Common Equity Tier 1 capital ratio strengthened to 41.1% at end-2019 from 40.7% at end-2018.


Corporate Governance (G) is a key driver behind the rating action. DBRS Morningstar sees as positive for the rating that ICO’s statutory owner is the Spanish Government and it benefits from an explicit guarantee of its liabilities from the Kingdom of Spain. As a result, the ratings are equalised with the ratings of the Kingdom of Spain.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

All figures are in Euro unless otherwise noted.

The principal methodologies are the Global Methodology for Rating Banks and Banking Organisations (11 June 2019) and the DBRS Morningstar Criteria: Guarantees and Other Forms of Support (22 January 2020)

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

The sources of information used for this rating include ICO Annual Accounts (2015-2019), and S&P Global Market Intelligence. DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS Morningstar 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.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

The sensitivity analysis of the relevant key rating assumptions can be found at:

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

Lead Analyst: Pablo Manzano, Vice President – Global FIG
Rating Committee Chair: Elisabeth Rudman - Managing Director, Head of European FIG - Global FIG
Initial Rating Date: February 25, 2013
Last Rating Date: June 5, 2020

DBRS Ratings GmbH, Sucursal en España
Calle del Pinar, 5
28006 Madrid
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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