Reuters: Financial Services and Real Estate: TEXT-S&P takes ratings actions on 5 Tunisian banks

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TEXT-S&P takes ratings actions on 5 Tunisian banks May 29th 2012, 17:31 Tue May 29, 2012 1:31pm EDT (The following statement was released by the rating agency) Overview -- On May 23, 2012, we lowered the foreign and local currency sovereign credit ratings on the Republic of Tunisia to 'BB/B' and assigned a stable outlook. -- The downgrade of the sovereign credit ratings has a direct negative impact on the five Tunisian banks that we rate. -- We are therefore lowering our long-term ratings on Arab Tunisian Bank, Banque de l'Habitat, Banque Tuniso-Koweitienne, Banque de Tunisie et des Emirats, and Societe Tunisienne de Banque. We are also lowering our short-term rating on Arab Tunisian Bank. At the same time, we are placing the long-term rating on Banque de Tunisie et des Emirats on CreditWatch negative. -- The outlook on Banque de l'Habitat, Banque Tuniso-Koweitienne, and Arab Tunisian Bank is stable. Rating Action On May 29, 2012, Standard & Poor's Ratings Services lowered its ratings on five Tunisian banks. Specifically, we took the following rating actions: -- We lowered our long- and short-term counterparty credit ratings on Arab Tunisian Bank (ATB) to 'BB/B' from 'BBB-/A-3'. The outlook is stable. -- We lowered our long-term counterparty credit rating on Banque de l'Habitat (BH) to 'BB-' from 'BB+' and affirmed the 'B' short-term rating. The outlook is stable. -- We lowered our long-term counterparty credit rating on Banque Tuniso-Koweitienne to 'BB' from 'BB+'. The outlook is stable. -- We lowered our long-term counterparty credit rating on Banque de Tunisie et des Emirats (BTE) to 'BB-' from 'BB' and subsequently placed it on CreditWatch with negative implications. We affirmed the 'B' short-term rating. -- We lowered our unsolicited public information ('pi') rating on Societe Tunisienne de Banque (STB) to 'Bpi' from 'BBpi'. Rationale The rating actions follow our downgrade of the Republic of Tunisia (see "Tunisia Foreign And Local Currency Ratings Lowered To 'BB/B' On Weaker Economic Indicators; Outlook Stable," published on May 23, 2012 on RatingsDirect on the Global Credit Portal). Despite overall stability and consensus since the removal of President Ben Ali in early 2011, we believe pronounced medium-term policy uncertainties will persist, at least until Tunisia adopts a new constitution and elects a government. We do not expect this before mid-2013. For the Republic of Tunisia, economic, fiscal, and external indicators--both in reported data and in our revised forecasts--are now weaker than we previously anticipated. The downgrade of the sovereign credit ratings has a direct negative impact on the five Tunisian banks that we rate, including those banks for which the ratings incorporate uplift over their stand-alone credit profile (SACP) due to potential extraordinary government support. The sovereign downgrade could also have a negative impact on our economic risk score for Tunisia, under our Banking Industry Country Risk Assessment (BICRA) methodology. A downward revision of this score could lead us to revise downward our anchor and our assessment of the banks' capital and earnings. Arab Tunisian Bank The ratings on ATB reflect our view of the risks that arise from operating in Tunisia. ATB is exposed to the economic slowdown as it operates only in Tunisia. It also faces sovereign risk because it holds a sizable portfolio of Tunisian government debt. However, ATB demonstrates stable asset quality and steady financial performance. The bank's parent, Jordan-based Arab Bank Group ('bbb+' group credit profile), provides support to the bank, particularly in terms of risk management and controls. We have not placed the ratings on ATB on CreditWatch negative as we consider it unlikely that the potential downward revision of its SACP will affect the ratings on the bank. As a "strategically important" subsidiary of Arab Bank Group, the long-term rating on ATB could benefit from three notches of uplift over its SACP (the uplift could be more limited as the ratings on the bank will not be higher than the sovereign). The stable outlook on ATB reflects that on the sovereign and our view that the bank's business and financial profile will likely remain unchanged. A positive rating action could follow a similar action on the sovereign, but would also depend on the bank maintaining its currently adequate levels of capital, adequate liquidity indicators, and stable asset quality. A negative rating action would follow a major deterioration in the bank's risk profile, particularly a weakening of its asset quality due to a period of prolonged recession. We would also lower the ratings on the bank if we lowered the ratings on the sovereign. Banque Tuniso-Koweitienne The ratings on BTK reflect our view of the risks that arise from operating in Tunisia. We consider that BTK is exposed to any deterioration in the economic environment as it operates only in Tunisia. The ratings on BTK reflect its relatively small customer franchise and legacy problem assets. Positive factors that support the ratings include BTK's strong capitalization and adequate funding and liquidity. The bank is supported by its parent, French bank BPCE (A/Stable/A-1). We have not placed the ratings on BTK on CreditWatch negative as we consider it unlikely that the potential downward revision of its SACP will affect the ratings on the bank. As a "strategically important" subsidiary of BPCE, we derive the long-term rating on BTK by adding three notches of uplift to its SACP. Under our criteria, we also cap the ratings at a level that is equal to the ratings on Tunisia. Consequently, the ratings on BTK remain at the same level as the ratings on Tunisia. The stable outlook on BTK reflects that on the sovereign and our view that the bank's business and financial profile will likely remain unchanged. A positive rating action could follow a similar action on the sovereign, but would also depend on the bank maintaining an adequate capitalization and liquidity position. A negative rating action could result from a significant rise in the bank's risk profile, including a sharp deterioration in asset quality, due to a prolonged economic slowdown. We would also lower the ratings if we lowered the ratings on the sovereign. Banque de l'Habitat We consider BH to be a government-related entity (GRE). The government owns a 58.1% stake in the bank, both directly and indirectly through various ministries and public institutions. The ratings factor in our view of the bank's long-standing customer franchise and stable asset quality, as well its adequate funding and liquidity. We believe there is a "high" likelihood that the Tunisian government would provide timely and sufficient extraordinary government support to BH in the event of financial distress. However, the ratings on the bank do not incorporate any uplift for extraordinary government support following the lowering of the local currency sovereign ratings. We have not placed the ratings on BH on CreditWatch negative as we consider it unlikely that the potential downward revision of its SACP will affect its ratings as we would incorporate a one-notch uplift above its SACP. The stable outlook on BH reflects that on the sovereign and our view that the bank's business and financial profiles will likely remain unchanged. A positive rating action could follow a similar action on the sovereign, but would also depend on the bank improving its capitalization and maintaining its current liquidity and asset quality indicators. A negative rating action could result from a significant rise in the bank's risk profile, including weakened asset quality, due to a prolonged economic slowdown, or a sharp deterioration in its liquidity. We would also lower the ratings if we lowered the ratings on the sovereign. Banque de Tunisie et des Emirats We consider BTE to be a GRE. The Tunisian government holds a 38.9% stake in BTE. The ratings on BTE reflect its relatively small customer franchise, and its weaker funding profile than peers. Positive rating factors include BTE's strong capitalization and risk position, and comparatively low levels of problem assets. We believe there is a "moderate" likelihood that the Tunisian government would provide timely and sufficient extraordinary support to BTE in the event of financial distress. However, the ratings on the bank do not incorporate any uplift for extraordinary government support following the lowering of the local currency sovereign ratings. We have placed the long-term rating on BTE on CreditWatch negative, reflecting the potential downward revision of the economic risk score for Tunisia under our BICRA methodology and the impact that this could have on the bank's SACP. We currently consider that any potential negative rating action on BTE would likely be limited to one notch. Societe Tunisienne de Banque The 'Bpi' rating on STB is based on our view of the risks involved in operating in Tunisia, the bank's weak capitalization, and large legacy problem assets. Positive rating factors include the bank's long-standing and large customer franchise in Tunisia, as well as access to a large deposit base. We consider STB to be a GRE. The government owns 52.5% of the bank (nearly 25% directly via ministries and the rest through various wholly owned GREs) and appoints the majority of the board members and the CEO. We believe there is a "high" likelihood that the Tunisian government would provide timely and sufficient extraordinary government support to STB in the event of financial distress. We typically do not use modifiers, outlooks, or CreditWatch placements for 'pi' ratings. Related Criteria And Research -- Banks: Rating Methodology And Assumptions, Nov. 9, 2011 -- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011 -- Rating Government-Related Entities: Methodology And Assumptions, Dec. 9, 2010 -- Banks: Bank Capital Methodology And Assumptions, Dec. 6, 2010 -- Use Of CreditWatch And Outlooks, Sept. 14, 2009 -- Group Rating Methodology And Assumptions, Nov. 9, 2011 Ratings List To From Arab Tunisian Bank Counterparty Credit Rating BB/Stable/B BBB-/Negative/A-3 Banque Tuniso-Koweitienne Counterparty Credit Rating BB/Stable/-- BB+/Negative/-- Banque de l'Habitat Counterparty Credit Rating BB-/Stable/B BB+/Negative/B Banque de Tunisie et des Emirats Long-Term Counterparty Credit Rating BB-/Watch Neg BB/Negative Short-Term Counterparty Credit Rating B B Societe Tunisienne de Banque Counterparty Credit Rating Bpi BBpi (Caryn Trokie, New York Ratings Unit) Link this Share this Digg this Email Reprints

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