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Banca March - Crecemos con valores, crecemos juntosNews

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Moody’s highlights Banca March's solid credit profile, solvency and liquidity and affirms the bank's A3 rating

  • The outlook on the agency's rating remains stable
  • Moody's also affirmed the bank's short-term deposit ratings at Prime-2
  • Moody’s highlighted the bank's strong profitability metrics and capital position, as well as the stability of its top-line earnings in the current context of low interest rates

The rating agency Moody's has affirmed Banca March's A3 long-term deposit rating with a stable outlook, it announced today. Banca March continues to be among the best-rated Spanish financial institutions, enjoying a stronger rating than Spanish sovereign debt, which is currently rated Baa1. Moody's also affirmed the bank's short-term deposit ratings at Prime-2.

Moody's emphasised that the affirmation of Banca March's ratings “reflects the bank's solid credit profile, with solvency metrics that rank among the strongest within Spanish rated banks, and its solid liquidity position underpinned by a high availability of liquid assets.” Moody’s also highlighted that the affirmation of the bank's ratings takes into account the change in consolidation method applied to Corporación Financiera Alba (Alba), of which Banca March owns 15%, which since year end-2018 consolidates through the equity method having traditionally consolidated globally.

Moody’s statement also refers to Banca March's “strong profitability metrics” relative to its domestic peers and points out that the bank's net income/tangible assets stood at 0.7% in 2018, which compares with a domestic system average of 0.5%, adding: "Fee and commission income, principally generated from the provision of securities services, asset management and insurance activities, constitute the bulk of the bank's revenues, ensuring a certain degree of stability in the bank's top-line earnings in a context of low interest rates and declining net interest income."

Banca March CEO José Luis Acea said: “This affirmation by Moody’s recognises Banca March’s strength and its capacity to generate profitable growth against a complex backdrop for its business model, which is focused on private banking and wealth management as well as corporate advisory services. At the same time, the bank is currently rolling out an intensive investment process, mainly in the area of digitalisation, to ensure that current and future customers can continue to enjoy the excellent service and products that set Banca March apart, whilst adhering, as always, to the philosophy of prudence, a long-term approach and shared growth with customers, employees, shareholders and society that has inspired the bank since its foundation.”

Moody's also affirmed Banca March's Baseline Credit Assessment (BCA) – which measures a bank's intrinsic strength to avoid a default without external support – at baa2, thanks to its solid credit profile and strong solvency ratios: "In terms of asset risk, the bank's problem loan ratio of 2.3% at end-June 2019 compares very favourably with the system average of 5.1%. The bank also performs stronger than the system in terms of repossessed real estate assets, and its nonperforming assets ratio, which combines problem loans and real estate assets, stood at 4.3% as of end-June 2019, materially below the system average of 8.2% as of the same date.

The bank's low asset risk profile is further reinforced with its strong loss absorption capacity measured through the Texas ratio (nonperforming assets/shareholders' equity + loan-loss reserves + real estate reserves), which, at 18% at end-June 2019, ranks among the lowest within Spanish rated banks."

Moody's also pointed out that Banca March's earnings will now be less dependent on the profits generated by CFA, after the bank lowered its stake in the company from 20% to 15% at the end of last year. The rating agency highlighted that, despite the impact of the smaller holding in CFA on Banca March's regulatory capital, its CET1 ratio stood at 16% at year-end 2018, “ranking among the strongest in the Spanish banking system”.

Moody’s referred to Banca March's strong liquidity position, pointing out that customer deposits cover the majority of the bank's funding needs (76% at the end of 2018) and that the bank enjoys a high availability of liquid assets, representing 38% of the bank's tangible banking assets also at year-end 2018. In addition, Banca March boasts a loan-to-deposit (LTD) ratio of 85%, one of the lowest in the Spanish banking sector.

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