May 2015 Financial News

Now FCB gets negative rating from Moody's

May 07, 2015

New York, May 06, 2015 -- Moody's Investors Service has today downgraded First Citizens Bank Limited (FCBL)'s long term local and foreign currency deposit ratings to Baa2 from Baa1 and assigned FCBL a counterparty risk assessment of Baa2(cr) / Prime-2(cr). FCBL's foreign currency short-term deposit rating was also downgraded to Prime-3 from Prime-2, while the Prime-2 local currency short-term deposit rating was affirmed. In addition, the bank's outlook has been revised to negative from stable. FCBL's baa3 baseline credit assessment was unaffected. 

Moody's also downgraded First Citizens (St. Lucia) Limited's foreign currency senior debt rating to Baa2 from Baa1, and changed the outlook to negative from stable. 

The following ratings were downgraded: 

First Citizens Bank Limited: 

Long term, local and foreign currency deposit ratings: to Baa2 from Baa1, outlook changed to negative from stable 

Short term, foreign currency deposit rating: to Prime-3 from Prime-2. 

First Citizens (St. Lucia) Limited: 

Long term, foreign currency senior debt rating: to Baa2 from Baa1, outlook changed to negative from stable 

The following rating was affirmed: 

First Citizens Bank Limited: 

Short term local currency deposit rating of Prime-2. 

RATINGS RATIONALE 

The rating actions follow Moody's downgrade of Trinidad and Tobago's (T&T) government bond rating to Baa2 from Baa1 and the change of the government's outlook to negative from stable. At the same time, Moody's lowered T&T's short term foreign currency deposit ceiling to Prime-3 from Prime-2. For details on this rating action please refer to Moody's press release "Moody's downgrades Trinidad and Tobago's government bond rating and issuer rating to Baa2 from Baa1, and changes the outlook to negative", dated 30 April 2015. 

The downgrade of First Citizens (St. Lucia) Limited's senior debt rating and its change in outlook reflects the rating actions on FCBL, as the debt rating is anchored on FCBL's local currency deposit rating. FCBL backs First Citizens (St. Lucia) debt issuance. 

FCBL's deposit ratings and First Citizens (St. Lucia) Limited's debt rating incorporate uplift from FCBL's baa3 baseline credit assessment (BCA), reflecting Moody's assumptions of a very high probability of public support for the bank's obligations if needed, based on the government's majority ownership and the importance of the bank's lending and deposit franchise to the local economy. This assumption is unchanged. However, the downgrade of the government's bond rating reflects a lower capacity on the part of the government to provide support. Consequently, the uplift incorporated in FCBL's ratings has declined to just one notch from two previously. 

The bank's negative outlook reflects the negative outlook on the government bond rating. Should the government be downgraded again, the bank is very likely to be downgraded as well. 

The baa3 BCA for FCBL reflects the bank's robust capitalization and liquidity buffers. Moody's also considered the relatively stable funding from retail deposits, from which FCBL benefits as one of the largest banks in the country. Key credit challenges derive from T&T's more modest economic growth prospects given the recent decline in oil prices. These weaker growth prospects are expected to drive a deterioration in asset quality and an increase in provisioning expenses, and to limit future earnings potential.

Source:
By the Multimedia Desk
Trinidad Express
Thursday May 7, 2015

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