Press Release

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

Banking Organizations
September 11, 2023

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 Stable trends. 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 ratings at “A” with a Stable trend on June 9, 2023. 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 of the Kingdom of Spain´s ratings would lead to a downgrade of ICO´s ratings. The Long-Term and the Short-Term trends would also move in line with the trend of the Kingdom of Spain.


Franchise Combined Building Block Assessment

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 ratings. However, ICO also has a limited business scope, constrained by its business model and its high dependence on the Spanish Government.

In response to the COVID-19 pandemic economic shutdown, the Spanish authorities announced support measures which effected ICO´s business activity. As a result, the Spanish government approved a scheme of up to EUR 100 billion for SMEs and Corporations (liquidity program) in 2020. This scheme is managed by ICO but the guarantees are provided by the Spanish government; consequently, ICO does not bear the credit risk related to these guarantees. In addition, the Spanish government also approved an additional 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 with the liquidity program, the investment program is managed by ICO, but the guarantees are provided by the Spanish Government. The guaranteed amounts of both schemes cover 76% of the credit losses of the EUR 141 billion loan portfolio.

Earnings Combined Building Block Assessment

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. The Bank’s net income totaled EUR 146 million in 2022, up from EUR 140 million in 2021. Net interest income (NII) stood at EUR 125.7 million in 2022 compared with EUR 104.5 million in 2021. NII increased in 2022 as wholesale funding costs repriced at a slower pace than the Bank´s loan portfolio. Moreover, net fees totaled EUR 54 million in 2022, and improved from the prior year (+6.7% year-over-year (YoY)). As a result, ICO’s Total Operating Income was EUR 233 million in 2022 compared to EUR 207 million (as calculated by DBRS Morningstar) in 2021. Despite the challenging economic situation, ICO reported a net release of total provisions, as these were EUR -20 million in 2022 compared to EUR -33 million in 2021.

Risk Combined Building Block Assessment

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. The first channel is 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 6.2 billion at end-2022. The second channel is direct lending, which typically consists of providing loans to large companies or structured finance projects and represented around EUR 10.7 billion at end-2022. During 2022, both portfolios decreased, with the indirect lending portfolio decreasing by around 12% YoY and the direct portfolio decreasing by around 4.6% YoY. This is explained by the fact that the government guarantees schemes have been utilised (especially during the pandemic), thus reducing the demand for new lending.

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 slightly decreased to 3.5% at end-2022 from 3.6% at end-2021 (as calculated by DBRS Morningstar), with gross NPLs totaling around EUR 376 million. The Bank’s coverage ratio for these NPLs remains very strong at around 160% at end-2022 (as calculated by DBRS Morningstar). DBRS Morningstar expects that the Bank will register an increase in NPLs in coming years due to the challenging economic environment.

Funding and Liquidity Combined Building Block Assessment

ICO’s funding structure is reliant on long-term and short-term 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.

Capitalisation Combined Building Block Assessment

DBRS Morningstar views ICO’s capitalisation as robust. ICO’s Common Equity capital ratio decreased, however, to 33.7% at end-2022 from 37.0% at end-2021. Capital ratios were affected by a decrease in capital and an increase in risk-weighted assets (RWAs). Capital decreased due to the higher deductions related to its equity stake exposures. The bank’s RWAs increased 8.7% YoY, due to an increase in its corporate bond exposures.

Credit rating actions on the Kingdom of Spain would have an impact on this credit rating. Consequently, passed-through Social credit considerations affect the ratings of ICO, as the Human Capital and Human Rights factor affects the ratings of the Kingdom of Spain. ESG factors that have a significant or relevant effect on the credit analysis of the Kingdom of Spain are discussed separately at

There were no Environmental or Governance factors that had a significant or relevant effect on the credit analysis.

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 Rating (4 July 2023)

All figures are in EUR unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (22 June 2023) In addition DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings in its consideration of ESG factors.

The following methodologies have also been applied
• DBRS Morningstar Global Criteria: Guarantees and Other Forms of Support (28 March 2023) -

The credit rating methodologies used in the analysis of this transaction can be found at:

The sources of information used for this credit rating include Morningstar Inc. and Company Documents, ICO Annual Accounts (2016-2022). DBRS Morningstar considers the information available to it for the purposes of providing this credit rating to be of satisfactory quality.

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

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar's outlooks and credit 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: For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see

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

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

Lead Analyst: Pablo Manzano, Vice President, Credit Ratings – European Financial Institutions, Fundamental Ratings
Rating Committee Chair: William Schwartz, Senior Vice President, Credit Ratings - Credit Practices, Fundamental Ratings
Initial Rating Date: February 25, 2013
Last Rating Date: September 13, 2022

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81
Plantas 26 & 27 28046 Madrid, Spain
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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