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Fitch downgrades Caja 3
Fitch Ratings said it downgraded Banco Grupo Caja 3's long-term issuer default rating to BB+ from BBB- and short-term issuer default rating to B from F3 and placed them on Rating Watch positive. The agency also downgraded the bank's viability rating to bb from bbb- and its €100 million subordinated bonds due 2014 and €50 million subordinated bonds due 2016 to BB- from BB+ and placed them on Rating Watch evolving. Finally, the bank's 3 support rating and BB+ support rating floor were affirmed.
The agency said the downgrade of the long-term issuer default rating reflects asset quality deterioration and a weakening of the bank's performance indicators. Its viability rating is sensitive to the recessionary environment in Spain; high unemployment, which may hamper deposit collection; and the severe downturn in the Spanish property market, Fitch said.
At the same time, Caja 3's ratings reflect a comfortable liquidity and funding position backed by its large customer deposit base and low market funding reliance, Fitch said.
The Rating Watches highlight the potential for an upgrade given the strong likelihood of Caja 3 merging into Ibercaja Banco, SA, Fitch said. Given the Spanish authorities' drive to consolidate Spain's fragmented banking sector, the agency considers the chances of the merger being granted regulatory approval to be quite good.
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