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Banca March - Crecemos con valores, crecemos juntosNews

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Moody's ratifies Banca March's A3 rating with a "stable" outlook and highlights its robust credit profile, capital equity ratio and liquidity

  • The Bank's short-term deposits maintain their P-2 rating.
  • Moody's highlights the Bank's robust credit profile, capital ratio and liquidity position, as well as its stable income in a low interest rate environment. 
The credit rating agency Moody's has ratified its opinion of Banca March 's long-term deposits: A3 with a "stable" outlook. This is one of the best ratings in the Spanish financial system, ahead of the Kingdom of Spain (currently Baa1). The Bank's short-term deposits maintain their P-2 rating.
Moody’s describes the outlook as "stable" because “the current ratings take into account the forecasts for the Bank's financial fundamentals over the next 12-18 months."
In its report, the ratings agency points out the " Bank's solid credit profile, with some of the highest capital equity ratios in the Spanish banking system and a robust liquidity position underpinned by the high availability of liquid assets.” The agency puts the Bank's strong credit profile down to the following: a consolidated brand in the Balearic Islands, where the Bank was founded, as well as in the corporate banking and wealth management segments, which provides a solid foundation for "stable and recurring profits"; robust capital ratios; and high liquidity, backed by the Bank's broad deposit base.
Moody’s highlights Banca March's limited exposure to problematic assets thanks to a "prudent" credit policy that has provided the Bank with asset quality indicators above the system average, both in terms of its NPL ratio (2.3% of total loans in June 2019 compared with the sector ratio of 5.1% at the same date) and hedge coverage for non-performing loans (around 55% in June last year, below the sector rate of 58.75%), with lower provisions required because of the Bank's improved asset quality indicators.
The rating agency also mentions the Bank's robust capital ratios, with a CET1 of 16.15% at the end of 2019, and its revenue structure, which is largely based on its specialised wealth management and private banking business but also includes revenues from the services provided by its subsidiary Inversis: "Service fees and revenues account for about 50% of the Bank's operating margin, ensuring a degree of income stability in a low interest rate environment with decreasing net interest income." These revenues, Moody's adds, have increased substantially since 2014, "largely offsetting the fall in net interest income since then."
Moody's also points to Banca March's " comfortable liquidity position", thanks to the Bank's broad deposit base.
In its report, Moody's notes that the asset quality and profitability of Spanish banks are likely to suffer as a result of an increase in problematic credits, "although the duration of the disruption and its implications for the Spanish economy and banking sector as a whole will depend on the containment of the virus and the gradual recovery of economic activity, which is difficult to predict."  

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