Research Update: Spain-Based CaixaBank Ratings Affirmed Despite Growing Risks Related To COVID-19; Outlook Stable

Despite governments' measures to contain the COVID-19 pandemic, European economies, including Spain, face an unprecedented challenge ahead. We believe that the weaker economic environment in Spain will dampen CaixaBank's profitability prospects in the next two years, in the form of bleak revenue generation and sharply higher credit provisions, but we expect its capitalization to withstand it. The bank's more modest internal capital generation will leave its capital with limited margin to absorb additional deterioration. However, the bank continues to build up a more sizable buffer of bail-inable debt instruments, which in our view would protect senior bondholders in a resolution scenario. We are affirming the long- and short-term issuer credit ratings at ?'BBB+/A-2'. The stable outlook reflects our view that

...- Despite governments' measures to contain the COVID-19 pandemic, European economies, including Spain, face an unprecedented challenge ahead. - We believe that the weaker economic environment in Spain will dampen CaixaBank's profitability prospects in the next two years, in the form of bleak revenue generation and sharply higher credit provisions, but we expect its capitalization to withstand it. - The bank's more modest internal capital generation will leave its capital with limited margin to absorb additional deterioration. - However, the bank continues to build up a more sizable buffer of bail-inable debt instruments, which in our view would protect senior bondholders in a resolution scenario. - We are affirming the long- and short-term issuer credit ratings at #'###+/A-2'. - The stable outlook reflects our view that additional risk stemming from weaker-than-expected economic prospects in Spain would be balanced by the bank's growing buffer of bail-inable debt instruments....

Research Update