20160704-穆迪服务-Credit_Outlook__Credit_Implications_Of_Current_Events_40页_1mb

Summary of Credit Outlook Document (4 July 2016)

Core Content

This document provides a comprehensive analysis of the credit implications of recent events in the financial sector across various regions and entities. It outlines both credit-positive and credit-negative developments, focusing on regulatory changes, corporate actions, and sovereign activities. The key areas covered are Russian banks, corporate mergers and acquisitions, insurance, sovereign credit implications, and covered bonds.

Main Points

Russian Banks

• Credit Positive Developments:

  • Separate Rules for Federal and Regional Banks: The Central Bank of Russia (CBR) is introducing different regulatory regimes for federal and regional banks, allowing the CBR to focus on large institutions while simplifying operations for small regional banks. This is expected to improve capital resilience and operational efficiency.
  • Changes to Financial Rehabilitation Process: The CBR is creating a special fund for financial rehabilitation, which will make the process faster, more efficient, and less costly.
  • New Bank Stress Test: A new stress test framework is being introduced, which will strengthen the CBR's oversight and impose additional capital requirements on undercapitalized banks. The initial application will focus on banks with assets exceeding RUB500 billion.
  • Korea Changes on Contingent Capital Securities: The regulatory changes in Korea are credit positive for banks, enhancing their capital structure and resilience.

• Credit Negative Developments:

  • Postponement of Bank Concentration Risk Assessment: The delay in implementing concentration risk assessments allows for continued deficiencies in risk management and corporate governance, which is credit negative.
  • Higher Mandatory Reserves on Bank Liabilities: The increase in reserve requirements will reduce banks' liquidity and profitability, negatively affecting their credit profile.

Corporates

• Mondelez's Offer for Hershey: The indication of interest from Mondelez for Hershey is credit negative for both companies. It could lead to increased leverage for Mondelez and raise event risk for Hershey.
• OHL's Sale of Abertis Stake: The sale is credit positive for OHL as it reduces liquidity risks and leverage, although it does not directly impact OHL's credit rating.
• Merger of IPIC and Mubadala: This merger is credit positive for both entities and Abu Dhabi, as it enhances operational efficiency and reduces contingent liabilities to the sovereign.

Key Information

Regulatory Changes in Russia

• The CBR is implementing a two-year transition period to differentiate between federal and regional banks.
• Federal banks must increase their capital to at least RUB1 billion.
• The new stress test will focus on banks with assets exceeding RUB500 billion.
• The special rehabilitation fund will provide direct capital injections instead of loans.

Corporate Actions

• Mondelez and Hershey: Mondelez is considering a $25 billion acquisition of Hershey, which is credit negative for both due to leverage and event risk.
• OHL and Abertis: OHL is selling a 7% stake in Abertis for €815 million, which will significantly reduce its debt and liquidity risk.
• IPIC and Mubadala Merger: The merger is expected to improve operational efficiency and reduce fiscal pressure on Abu Dhabi.

Sovereign Credit Implications

• Turkey and Russia Rapprochement: The improved relationship is credit positive for both countries.
• Israel Reopens Diplomatic Ties with Turkey: This move supports regional stability and economic development.
• Georgia's Free Trade Agreement: The agreement is expected to boost export growth.
• China Suspends Communication with Taiwan: This is a credit negative for Taiwan due to the potential impact on its international standing and economic relations.

Covered Bonds

• Finland Caps Residential Mortgage LTV Ratios: This action is credit positive for both banks and covered bonds, as it improves the stability of the mortgage market and reduces credit risk.

Credit In Depth

US Banks

• The Federal Reserve's review of bank capital plans is credit positive, as all banks passed the quantitative test, indicating strong capital resilience.
• Higher equity payouts are skewed toward share buybacks, which are easier to curtail than dividends, making this a credit positive development.

Summary of Ratings and Analysts

• Ilya Pestryakov – Associate Analyst
• Olga Ulyanova – Vice President - Senior Analyst
• Lev Dorf – Assistant Vice President - Analyst
• Alexander Proklov – Vice President - Senior Analyst
• Petr Paklin – Assistant Vice President - Analyst
• Maria Malyukova – Assistant Vice President - Analyst
• Linda Montag – Senior Vice President
• Brian Weddington – Vice President - Senior Credit Officer
• Matthias Heck – Vice President - Senior Analyst
• Wen Li – Associate Analyst
• Rehan Akbar – Assistant Vice President - Analyst
• Mathias Angonin – Analyst

Conclusion

The document highlights a mix of credit-positive and credit-negative developments across different sectors and regions. While Russia is implementing measures to strengthen its banking sector, some delays and increased reserve requirements are seen as negative. Corporate actions, such as the potential Mondelez-Hershey deal and the OHL-Abertis sale, have mixed implications. Sovereign actions, including diplomatic rapprochement and trade agreements, are generally credit positive, whereas the suspension of communication between China and Taiwan is a credit negative. Overall, the focus is on regulatory changes and their impact on financial stability and credit risk.