Summary: Abanca Corporacion Bancaria S.A

Large franchise in Galicia, northeastern Spain. Improving asset quality metrics. Retail oriented funding profile. Regional geographic concentration. Weak operating profitability and poor efficiency. Limited capitalization and large deferred tax assets (DTA) stock. The positive outlook on Abanca 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 becoming sustainably profitable, as well as our view of its capital strength compared with the risks it faces. We expect that Abanca will continue to reduce its portfolio of nonperforming assets (NPAs), while keeping its

...Limited capitalization and large deferred tax assets (DTA) stock. Outlook: Positive The positive outlook on Abanca 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 becoming sustainably profitable, as well as our view of its capital strength compared with the risks it faces. We expect that Abanca will continue to reduce its portfolio of nonperforming assets (NPAs), while keeping its coverage ratios similar to current levels. In particular, we forecast that the bank's NPAs will fall to about 9% of gross loans by end-2018. We could revise the outlook to stable if, contrary to our current expectations, we do not foresee the economic or operating environment in Spain becoming more supportive for banks. We could also revise the...

Summary