FINANCIAL INSTITUTIONSISSUER COMMENT 13 JULY 2015BANCO SANTANDER S.A. (SANTAN)Moodys Senior Unsecured Rating A3Moodys Outlook POSBond-Implied Rating N/ACDS-Implied Rating Baa3EDF-Implied Rating Ba1As of 7/8/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.This report has been republished on 1 July 2015 with the correction to Outlook in the ratings box from POS to STA.Market Signals ReviewBanco Santander S.A.: Two Market-Implied Ratings Fall Over the last three months the CDS- and EDF'-implied ratings for Banco Santander fell. The banks CDS-implied rating worsened by one notch to Baa2 . The EDF-implied rating dipped from Baa3 to Ba1 (Figure 1).We do not publish a bond-implied rating for Banco Santander because the banking institution does not have outstanding bonds that fit our model.FIGURE 1. BANCO SANTANDER: MOODYS AND MARKET-IMPLIED RATINGS, LAST 90 DAYS (DAILY DATA)According to our ratings gap-conditioned transition matrices, companies rated A3 with a CDS-implied rating of Baa3 outperformed the broad market 29% of the time overMOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 13 JULY 2015 MARKET SIGNALS REVIEW : BANCO SANTANDER S.A.: TWO MARKET-IMPLIED RATINGS FALLthe following 12 months, matched the markets performance 12% of the time, and underperformed the broad market 59% of the time.Banco Santanders market-implied ratings gaps reflect the one notch upgrade of its Moodys rating to A3 on June 17. The CDS-implied ratings gap is -3 notches, versus -2 notches three months ago (Figure 2). The EDF-implied ratings gap also weakened over the three months by two notches from -2 to -4 notches.FIGURE 2. BANCO SANTANDER: MARKET-IMPLIED RATINGS GAPS, LAST 90 DAYS (DAILY DATA)MOODY'S ANALYTICS FINANCIAL INSTITUTIONS3 ...
