ING Groep NV and Rabobank Nederland were among five Dutch banking groups cut by Moody’s Investors Service on concern that the recession, regional debt crisis and dependence on wholesale funds makes them vulnerable.
Long-term debt ratings at ING, Rabobank, ABN AMRO Bank and LeasePlan Corp were lowered by two grades, and SNS Bank NV received a one-level cut, Moody’s said in a statement yesterday. KBC Groep, Belgium’s biggest bank and insurer, was also lowered two grades, the ratings company said.
European policymakers are struggling to contain financial turmoil that forced the Spanish government to seek a 100 billion euro (US$126 billion) bailout for its banks on June 9. Mounting concern about Spain’s public finances and Greek elections tomorrow, which may determine its exit from the euro, are intensifying the crisis, now in its third year.
“Dutch banks will face difficult operating conditions throughout 2012 and possibly beyond,” Moody’s said in the statement.
The Netherlands “is affected by the ongoing euro area debt crisis and regional economic weakness,” it said.
ING Groep, the biggest Dutch financial services company, is now rated “A3,” while its ING Bank unit was downgraded two levels to “A2.” Rabobank was lowered to “Aa2,” the third-highest investment grade, ABN AMRO to “A2” and LeasePlan to “Baa2.” SNS Bank is now “Baa2.” ING’s ratings have a negative outlook and those of the other lenders are stable, Moody’s said.
“This is in line with what Moody’s signaled and had been priced in by investors,” said Walter Leering, a fixed income analyst at Theodoor Gilissen Bankiers in Amsterdam. “The one-step cut for SNS is a positive. Moody’s had indicated it might be downgraded by as many as three notches and that would have reduced it to junk status.”
Moody’s cut Brussels-based KBC Group two levels to “Baa1,” and its KBC Bank unit to “A3,” according to a separate statement that cited the lender’s “exposures to markets experiencing material stress, notably Ireland and Hungary.”
Market and economic conditions may also constrain KBC’s ability to repay government funds by the end of 2013, Moody’s said.
The decision “comes as no surprise as Moody’s has been taking rating actions on a large number of European banks,” ING spokesman Raymond Vermeulen said.
Arien Bikker, a spokesman for ABN Amro, said the rating action was “in line with the indication given in February.”
“This expected downgrade is in line with the overall tendency so far among the financial institutions under review,” KBC said in an e-mailed statement.
The ratings company recognized that Dutch banks have “so far retained good access to market funding and asset quality has remained solid to date,” said Hans Pluijgers, an Amsterdam-based analyst at Credit Agricole Cheuvreux. “With the exception of the real estate loan book of SNS Reaal we agree with this argument.”
Loan losses on Dutch mortgages will probably remain manageable, Pluijgers said in a note to investors.
ING’s loans in Spain are “sizable, but manageable,” the Amsterdam-based bank said on Thursday. It had 18.4 billion euros in bank lending in Spain in the first quarter.
Moody’s also downgraded UniCredit’s leasing unit, UniCredit Leasing SpA, by two levels to “Baa2” from “A3.”