Summary: Abanca Corporacion Bancaria S.A

Large franchise in Galicia. Adequate capital. Retail oriented funding profile. Weak operating profitability and poor efficiency. High stock of deferred tax assets, which lowers quality of capital. Regional geographic concentration. The positive outlook on Abanca Corporacion Bancaria S.A reflects that we could raise our long-term rating in the next 12 months if Spain's economic and operating environment becomes more supportive, ultimately resulting in a strengthening of banks' creditworthiness and therefore a higher anchor for banks operating primarily in Spain. An upgrade would also depend on Abanca progressing in making its banking business sustainably profitable. We expect that Abanca will continue to reduce its portfolio of problematic assets, with nonperforming assets (NPAs) falling to slightly less than 10% of gross loans

... The positive outlook on Abanca Corporacion Bancaria S.A reflects that we could raise our long-term rating in the next 12 months if Spain's economic and operating environment becomes more supportive, ultimately resulting in a strengthening of banks' creditworthiness and therefore a higher anchor for banks operating primarily in Spain. An upgrade would also depend on Abanca progressing in making its banking business sustainably profitable. We expect that Abanca will continue to reduce its portfolio of problematic assets, with nonperforming assets (NPAs) falling to slightly less than 10% of gross loans by end-2017, while keeping its coverage ratios high. We also expect its quality of capital to remain constrained by its stock of time-difference deferred tax assets, which is larger than those of its peers at close to 100% of its total adjusted capital (TAC) over our outlook horizon. We could revise the outlook to stable if, contrary to our...

Summary