S&P: Veneto Banca Preferred Stock Rating Raised To 'CC' From 'D' On Resumption Of Coupon Payments
On Dec. 21, 2016, Veneto Banca resumed full coupon payment due on its €200 million hybrid instrument. As a result, we have raised our rating on the instrument to 'CC' from 'D'.
The 'CC' ratings reflect our view that:Despite resumption of coupon payments for this year, the bank will likely suspend next year's coupon payment, absent any unforeseen positive development over the next 12 months. We consider this default risk to be consistent with a 'CCC' scenario under our criteria. The notes are subordinated, for which we deduct two notches. We expect the bank to remain loss making in 2016 and 2017. Therefore, absent any measures taken to strengthen its capital to a level sufficient to cover these losses, we expect Veneto Banca's total capital ratio to decrease going forward. Veneto Banca recently communicated an updated capital requirement resulting from the European Central Bank's Supervisory Review and Evaluation Process (SREP). As a result, the bank has to maintain a 12.25% transitional total capital ratio starting from March 31, 2017. We note that this ratio was 12.57% at end-June 2016--very close to the threshold.
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