DBRS Morningstar Assigns Ratings to Novo Banco’s EUR 5 billion EMTN Programme

DBRS Ratings GmbH (DBRS Morningstar) assigned a B (high) rating with a Stable trend to Long-Term Senior Debt to be issued under Novo Banco’s EUR 5 billion EMTN Programme (the Programme). In addition, DBRS Morningstar has also assigned a B rating for Senior Non-Preferred debt issuance, and a B (low) rating for Subordinated debt to be issued under the programme.

RATING DRIVERS

The Programme ratings will move in tandem with the ratings of Novo Banco.

An upgrade of Novo Banco’s ratings would require a sustained improvement in profitability and a strengthening of the capital position. A deterioration in the Bank’s capital position or a significant weakening in asset quality would lead to a downgrade of the ratings.

ESG CONSIDERATIONS

The Corporate Governance subfactor remains relevant to the ratings and trends of Novo Banco. The bank has faced reputational risks that were mainly linked to past management and the failure of its predecessor bank Banco Espirito Santo (BES). The Bank is also subject to ongoing scrutiny by Portuguese and European authorities in relation to its restructuring plan. Political risk is also considered as relevant, reflecting the current disputes between the Bank and the Resolution Fund. These concerns are reflected in the Risk building block.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in EUR unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (23 June 2022) https://www.dbrsmorningstar.com/research/398692/global-methodology-for-rating-banks-and-banking-organisations. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022) https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings

The sources of information used for this rating include Morningstar Inc. and Company Documents, Novo Banco Press Release H1 2022 Results, Novo Banco 2016-2021 Annual Reports, Novo Banco EMTN Programme Documentation. DBRS Morningstar considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

DBRS Morningstar does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

The sensitivity analysis of the relevant key rating assumptions can be found at: https://www.dbrsmorningstar.com/research/402286

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Nicola De Caro, Senior Vice President, Global FIG
Rating Committee Chair: Ross Abercromby, Managing Director – Global Financial Institutions Group
Initial Rating Date: August 5, 2014
Last Rating Date: April 14, 2022

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