Research Update: Sabadell Outlook Revised To Stable On Asset Quality Improvement, Government Support, And ALAC Review; Ratings Affirmed

We believe the prospect of extraordinary government support for Spanish banks is now uncertain in view of the country's well-advanced and effective resolution regime. We are therefore removing the one notch of uplift for government support that we had previously incorporated in the long-term counterparty credit rating on Banco de Sabadell S.A. We have also recognized a strengthening in Sabadell's intrinsic creditworthiness. We consider that Sabadell is unlikely to increase its additional loss-absorbing capacity (ALAC) above our 5% threshold within a four-year projection period. We are revising the outlook on Sabadell to stable from negative and affirming the 'BB+/B' long- and short-term counterparty credit ratings. The stable outlook reflects our view that the bank will reach a risk-adjusted capital ratio

Research Update