Fitch Ratings has assigned
The notes were issued on
The perpetual securities represent
Key Rating Drivers
The Additional Tier 1 notes are rated three notches below
The notching for 'Poor' recoveries reflects our assumptions for deeply subordinated debt issued at a holding company as per our criteria; should the company be wound up, the issuer's payment obligations under the securities rank behind all senior and subordinated creditors but ahead of ordinary shares. The securities will rank equally among other Additional Tier 1 securities.
The notes would be written off in part or in full should the
Interest payments are non-cumulative and management has the right to cancel payments, in whole but not in part, at its discretion. We therefore assess the risk of non-performance as 'Moderate' and we notch down another level from the IDR to reflect this discretion. We think management's discretion to cancel interest is the key feature driving the level of notching for non-performance risk. This assessment implies one extra notch than our treatment of
The notes receive 100% equity credit in the calculation of Fitch's Prism Factor-Based Model, in line with our criteria. The notes are treated as 0% debt in the Fitch-calculated financial leverage ratio, given that the instruments are akin to deeply subordinated debt that has the key features of perpetual preferred securities, including permanence and deferrable coupons that are non-cumulative.
RATING SENSITIVITIES
The rating on the securities will move in tandem with
Factors that could, individually or collectively, lead to negative rating action/downgrade:
deterioration in the financial performance, with the combined ratio above 102%, for a sustained period;
PCA coverage staying below 1.5x and the Fitch Prism Model Score below the upper end of 'Strong' for a prolonged period;
The Fitch-calculated financial leverage ratio remaining above 30%;
A significant worsening in the company profile, evident from a loss of market share and franchise, may also lead to a downgrade.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
material improvement in group financial fundamentals, with return on equity consistently above 10% and the combined ratio below 94%;
the Fitch-calculated financial leverage ratio below 23% and fixed-charge coverage ratio above 9x on a prolonged basis, while maintaining a Fitch Prism Model Score of 'Very Strong'.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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