Press Release

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

Banking Organizations
September 10, 2021

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). All ratings have a Stable Trend. 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 3, 2021. 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 under the Royal Decree Act 706/1999. As a result, DBRS Morningstar’s support assessment for ICO is SA1 and ICO’s issuer ratings and trend are equalised with the Long-Term and Short-Term Foreign and Local Currency 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 be reflected in 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 specialized lending institution and the state’s financial agency, ICO enjoys a unique and dominant franchise in Spain which contributes to support its current rating. Moreover, the ratings also consider ICO’s limited business scope, constrained by its business model and its high dependence on the Spanish Government.

During 2020 ICO´s operating environment registered a significant deterioration under the coronavirus (COVID-19) pandemic. In this context, the Spanish government approved a scheme of up to EUR 100 billion for SMEs and Corporates (liquidity program). For SMEs, this instrument covers up to 80% of the credit losses at the participating Spanish banks. As of end-July 2021, the liquidity program has allocated to banks around EUR 92 billion of guarantees resulting in around EUR 121 billion of loans to SMEs and Corporates. 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 (investment program) to provide funding sources to new investment projects (Real Decreto-ley 25/2020, de 3 de julio). As of end-July 2021, the investment program has allocated to banks around EUR 7.7 billion of guarantees resulting in around EUR 10 billion of loans to SMEs and Corporates. As with the other program, the investment program 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. DBRS 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 79 million in 2020, down from EUR 109 million in 2019. Results in 2020 were affected by loan loss provisions, which rose to EUR 22 million. This contrasts with provision releases of EUR 100 million and EUR 102 million recorded in 2018 and 2019, respectively. DBRS Morningstar notes that the provision release in 2019, as in the previous year, was linked to the Bank’s high level of coverage for non-performing loans (NPL). Nevertheless, the COVID-19 environment translated into the need for new loan loss provisions. However, the Bank also reported a release of EUR 72.8 million of other provisions related to other contingencies. As a result, total provisions were EUR -50.7 million in 2020 compared to EUR -96 million in 2019, explaining most of the difference between the reported Net Income in those two years.

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 9.3 billion at end-2020; 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 12 billion at end-2020. During 2020, as a result of the COVID-19 environment the two portfolios have evolved in different ways, with the indirect lending portfolio decreasing by around 9% YoY whereas the direct portfolio increased by around 10% YoY. This is explained by the fact that the government guarantees schemes have been used substantially, thus reducing the demand for the indirect lending channel. Lastly, in order to support the financial conditions of SMEs due to the COVID-19, ICO has increased its short term corporate debt purchase program for new issues in the Spanish Alternative Fixed Income Market (MARF). At end-February 2021, ICO has purchased EUR 642 million of debt securities at the MARF.

DBRS Morningstar considers that in coming years ICO´s balance sheet will likely grow as the Bank seeks to improve funding access for SMEs and Corporates in those economic sectors which are facing challenges. 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 3.95% at end-2020 from 4.5% at end-2019 (as calculated by DBRS Morningstar), with gross NPLs totalling around EUR 473 million. The Bank’s coverage ratio for these NPLs remains very strong at around 141% at end-2020 (as calculated by DBRS Morningstar). DBRS Morningstar expects that the Bank will register an increase in NPLs in coming years after the full removal of government support measures.

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 stood at a solid 37.4% down from 41.1% at end-2019, given the Bank’s higher Risk-Weighted-Assets (RWAs) resulting from a larger direct lending book and corporate fixed income portfolio.


ICO´s ESG drivers mirror those of the Kingdom of Spain given the Kingdom’s guarantee of ICO’s liabilities. Human Capital and Human Rights (S) were among the key ESG drivers behind the most recent rating action on the Kingdom of Spain. Spain’s per capita GDP was relatively low at USD 26,832 in 2020 compared with its euro area peers. This factor was taken into account primarily in the “Economic Structure and Performance” building block.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at

All figures are in Euros (EUR) unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (July 19, 2021)
Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021)
and the DBRS Morningstar Criteria: Guarantees and Other Forms of Support (May 31, 2021)

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 Company Documents, ICO Annual Accounts (2015-2020), 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 12-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: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

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

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

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: March 15, 2021

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