February 03, 2010 |
|ING Group's A1 senior, A2 dated subordinated debt ratings also confirmed|
Paris, February 02, 2010 -- Moody's Investors Service today confirmed ING
Bank NV's C+ bank financial strength rating (BFSR), Aa3 senior long-term
debt and deposit ratings and A1 dated subordinated debt rating. The BFSR
carries a negative outlook, while the long-term debt and deposit ratings
carry a stable outlook. The bank's Prime-1 short-term debt and deposit
ratings were affirmed. Moody's also confirmed, with a stable outlook, the
A1 senior rating and the A2 dated subordinated debt rating of ING Groep NV
The rating actions conclude Moody's review for possible downgrade of the
ratings of ING Bank and ING Group initiated on 21 September 2009 and
maintained on 27 October after ING and the European Commission reached
agreement on a restructuring plan.
Moody's also confirmed the Ba1 ratings of ING Group's preference stocks, ING
Verzekeringen NV's subordinated debt securities and Equitable of Iowa
Companies Capital Trust II's preferred stocks. The B1 rating of ING Capital
Funding Trust III's trust preferred securities was also confirmed. These
ratings now carry a positive outlook and the rating actions conclude the
review with direction uncertain initiated on 27 October 2009.
CONFIRMATION OF THE BANK'S C+ BFSR, NEGATIVE OUTLOOK
ING Bank's C+ BFSR was confirmed as Moody's believes it adequately
represents the entity's creditworthiness, given the relief provided by the
asset protection scheme on the Alt-A portfolio, the successful completion of
a EUR7.5 billion rights issue in December 2009 and, above all, the proposed
restructuring plan, which includes:
- the disposal of the bank's insurance activities by 2013;
- the merger of the bank with the group holding company, thus eliminating
double leverage; and
- the fact that the plan implies only limited changes to the bank's overall
scope and franchise, the largest change being the disposal of ING Direct in
The C+ BFSR incorporates Moody's expectation that the bank's profitability
and efficiency will remain lacklustre in coming years, albeit at levels
above those of 2008-09. However, it also reflects the rating agency's view
that the bank's capital position, although moderate for its rating level,
nonetheless represents an adequate buffer for it to absorb potential losses
arising from the securities or loan portfolio.
Furthermore, Moody's notes that:
- the timing of the implementation of the restructuring plan is uncertain;
- the group is still to decide between various options for the disposal of
its insurance operations; and
- given the relatively long horizon of this plan, some changes are possible.
The negative outlook on the C+ BFSR captures Moody's view of the potential
uncertainties for the bank over the coming one- to two-year period.
CONFIRMATION OF THE BANK'S SENIOR DEBT RATINGS, STABLE OUTLOOK
ING Bank's Aa3 long-term debt and deposit ratings were confirmed as the
Group, and particularly the Bank, is and will remain a systemically
important institution in two European markets, the Netherlands and Belgium,
and continues to have a significant retail presence throughout Europe via
The ratings carry a stable outlook, as they would not come under adverse
pressure in the event of a one-notch downgrade of the BFSR.
CONFIRMATION OF ING BELGIUM'S BFSR AND SENIOR DEBT RATINGS
ING Belgium SA/NV (ING Belgium)'s BFSR was confirmed at C+ with a stable
outlook reflecting the inherent stability of ING Belgium's profile. The
Aa3 long-term debt and deposit ratings were also confirmed with a stable
outlook as a consequence of both the confirmation of its parent's debt
ratings and of the bank's systemic nature in Belgium.
CONFIRMATION OF ING GROUP'S SENIOR AND DATED SUBORDINATED RATINGS, STABLE
The confirmation of ING Group's senior and subordinated ratings is a direct
consequence of the confirmation of ING Bank's corresponding senior and
subordinated ratings. ING Group will become a pure bank holding company of
ING Bank, given the group's announcement of its intention to divest its
insurance operations by 2013. Therefore, ING Group's senior and subordinated
ratings reflect Moody's standard notching for bank holding companies
relative to ING Bank's ratings. The stable outlook on ING Group's ratings
reflects the stable outlook on ING Bank's senior rating.
Moody's notes that double leverage at ING Group remains high and was close
to 140% at the end of 2008 (double leverage at the holding company is
calculated as the ratio between investments in subsidiaries and adjusted
shareholders' equity). However, the rating agency expects this to decrease
considerably in the next few years with the repayment of the group's debt
from the proceeds it secures from the disposal of its insurance operations.
Moody's adds that it views as beneficial (from a quality of capital
perspective) the EUR7.5 billion rights issue completed in December 2009 to
replace the EUR5 billion core Tier 1 securities received from the Dutch
state and to complete the additional payments for the illiquid assets
CONFIRMATION OF HYBRID RATINGS, POSITIVE OUTLOOK
Moody's confirmation of the group's Ba1 and B1 hybrid securities reflects
the European Commission's decision not to force coupon deferral on these
securities as part of its approval of ING's state-aid package. The current
ratings of the hybrid securities reflect our view that, given the
restructuring of the group, there is still some risk of coupon deferral on
these securities. The positive outlook reflects the possibility of these
ratings to go up when the execution risk deriving from the group's
restructuring process diminishes.
All of the hybrid securities contain a dividend pusher provision.
However, Moody's notes that the dividend pusher is not applicable as no
dividend has been paid since August 2008.
The Ba1 rating on the cumulative hybrid securities reflects the fact that
the coupon payments on these instruments are cumulative, thereby limiting
the loss severity of a coupon deferral if this were to occur.
The B1 rating on the only non-cumulative trust preferred securities issued
by ING Capital Funding Trust III reflects the fact that, under a
going-concern assumption, the expected loss for investors on this
non-cumulative instrument is higher than on cumulative securities.
LIST OF RATING ACTIONS
The following ratings were confirmed with a negative outlook:
ING Bank: C+ BFSR;
ING Bank Eurasia: Baa1 LT Bank deposits;
ING Bank Slaski SA: A2 LT Bank deposits.
The following ratings were confirmed with a stable outlook:
ING Bank: Aa3 senior debt and deposit ratings;
ING Bank NV: A1 dated subordinated rating;
ING Belgium SA/NV: C+ BFSR;
ING Belgium SA/NV: Aa3 senior debt and deposit ratings;
ING Groep NV: A1 senior debt rating;
ING Groep NV: A2 dated subordinated rating; and
Lion Connecticut Holding, Inc. (guaranteed by ING Groep NV): A1 senior debt
The following ratings were confirmed with a positive outlook:
ING Groep NV: Ba1 cumulative preference stocks;
ING Verzekeringen NV: Ba1 cumulative dated subordinated debt securities with
optional coupon deferral provision;
Equitable of Iowa Companies Capital Trust II (guaranteed by Lion Connecticut
Holding Inc.): Ba1 cumulative preferred stock with optional coupon deferral
provision rating; and
ING Capital Funding Trust III (guaranteed by ING Groep NV): B1
non-cumulative trust preferred securities rating.
PREVIOUS RATING ACTIONS AND MOODY'S METHODOLOGIES
The last rating actions took place on 27 October 2009 when Moody's
downgraded the insurance financial strength ratings of ING Group's US life
insurance operating companies to A2 from A1 and ING Verzekeringen's senior
debt to Baa1 from A2. ING Verzekeringen's short-term Prime-1 debt rating was
also downgraded, to Prime-2. ING Bank's C+ BFSR and Aa3 senior debt ratings
and ING Group's A1 senior debt rating remained on review for possible
downgrade, as did the ratings of certain of ING Bank's subsidiaries. Moody's
changed the review direction to uncertain from possible downgrade on the Ba1
ratings of ING Group's preference stocks, ING Verzekeringen's subordinated
debt securities and Equitable of Iowa Companies Capital Trust II's preferred
stocks. The review direction on ING Capital Funding Trust III's B1 trust
preferred securities was also changed to uncertain from possible downgrade.
The principal methodologies used in rating ING and its subsidiaries are
"Moody's Global Rating Methodology for Property and Casualty Insurers",
published in July 2008, "Moody's Global Rating Methodology for Life
Insurers", published in September 2006, "Bank Financial Strength
Ratings: Global Methodology", published in February 2007, and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology",
published in March 2007; these methodologies are available on www.moodys.com
in the Rating Methodologies sub-directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process
of rating these issuers can also be found in the Rating Methodologies
sub-directory on Moody's website.
The ratings of bank subordinated capital securities are assigned in line
with Moody's existing methodology entitled "Moody's Guidelines for Rating
Bank Hybrid Securities and Subordinated Debt" (published in November
2009) and the publication of Moody's revised rating methodology for
insurance hybrids, issued on 12 January 2010. (For further details please
refer to the announcement entitled, "Moody's updates its methodology for
insurance hybrid ratings".)
Based in Amsterdam, ING Groep NV had total assets of EUR1,188 billion at
end-September 2009 and reported a net loss of EUR223 million for the nine
months ending September 2009.
Based in Amsterdam, ING Bank had total assets of EUR900 billion at
end-September 2009 and its Tier 1 ratio stood at 9.7%, on an unfloored Basel
II basis (applying the 80% floor, the Tier 1 ratio would have stood at
8.9%). In the first nine months of 2009, ING Bank reported a net profit of
The insurance activities of ING Groep had total assets amounting to EUR298
billion at end-September 2009 and the insurance capital coverage ratios for
insurance activities was 256%. In the first nine months of 2009, the
insurance activities of ING Groep reported a net loss of EUR644 million.