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Transcript of BNG Bank N.V. reports...آ  MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS Key indicators Exhibit...


    CREDIT OPINION 22 November 2019



    BNG Bank N.V. Domicile Netherlands

    Long Term CRR Aaa

    Type LT Counterparty Risk Rating - Fgn Curr

    Outlook Not Assigned

    Long Term Debt Aaa

    Type Senior Unsecured - Fgn Curr

    Outlook Stable

    Long Term Deposit Aaa

    Type LT Bank Deposits - Fgn Curr

    Outlook Stable

    Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date.


    Guillaume Lucien- Baugas


    VP-Senior Analyst

    Delphine Larrousse +33.1.5330.3361 Associate Analyst

    Alain Laurin +33.1.5330.1059 Associate Managing Director

    BNG Bank N.V. Update to credit analysis

    Summary BNG Bank N.V.'s (BNG Bank) Baseline Credit Assessment (BCA) of a1 reflects the bank's (1) role as the largest lender to the Dutch public sector; (2) entrenched franchise in a niche market which results in exceptional stability in its fundamentals; (3) very high asset quality because its portfolio is mostly comprised of loans to Dutch public entities; 4) high capitalisation; and (5) adequate funding profile and liquidity position with limited maturity mismatches.

    BNG Bank's Aaa deposit and senior unsecured ratings reflect (1) the bank's a1 standalone credit strength; (2) the application of our Advanced Loss Given Failure (LGF) analysis, resulting in a two-notch LGF uplift from the bank's Adjusted BCA of a1, given its significant volume of senior unsecured debt; and (3) a two-notch government support uplift, reflecting a very high support probability from the Government of Netherlands (Aaa stable) owing to the bank's public ownership and its role as one of the main providers of financing to the Dutch public sector. The Counterparty Risk (CR) Assessment of Aaa(cr)/Prime-1(cr) assigned to BNG Bank is four notches above the bank's BCA, reflecting the substantial volume of bail-in-able liabilities and the very high probability of government support.

    Exhibit 1

    Rating Scorecard - Key financial ratios

    0.1% 32.1% 0.2%

    90.7% 10.8%




















    Asset Risk: Problem Loans/

    Gross Loans

    Capital: Tangible Common

    Equity/Risk-Weighted Assets

    Profitability: Net Income/

    Tangible Assets

    Funding Structure: Market Funds/

    Tangible Banking Assets

    Liquid Resources: Liquid Banking

    Assets/Tangible Banking Assets

    Solvency Factors (LHS) Liquidity Factors (RHS)

    BNG Bank N.V. (BCA: a1) Median a1-rated banks

    S o

    lv e

    n c y F

    a c to


    L iq

    u id

    ity F

    a c to


    Source: Moody's Financial Metrics


    Credit strengths

    » Largest lender to the Dutch public sector, fully owned by Dutch public entities

    » High asset quality, reflected in the very low level of nonperforming loans (NPLs)

    » Financial performance commensurate with the bank's public policy role

    » Large volume of senior debt, resulting in the bank's deposit and senior unsecured debt ratings benefiting from a very low loss given failure rate and a two-notch uplift from the BCA

    » Very high probability of government support, resulting in a two-notch uplift for the bank's debt and deposit ratings

    Credit challenges

    » Borrower concentration, given the bank's narrow public policy mandate

    » Mismatches between assets and liabilities, mitigated by an ample liquidity portfolio and diverse funding

    Outlook We do not expect any significant change in BNG Bank's creditworthiness in the near term, as reflected in the stable outlook on the bank's ratings. Our view is also underpinned by a benign economic environment in the Netherlands.

    Factors that could lead to an upgrade Upward pressure on BNG Bank's BCA could result from a lower reliance on wholesale funding; however, this is unlikely given the bank's business model. An upgrade of the bank's BCA will not trigger any upgrade of the bank's deposit and senior unsecured ratings, which are already at Aaa.

    Factors that could lead to a downgrade Downward pressure on BNG Bank's BCA could result from (1) a deterioration in the creditworthiness of the Dutch public sector, (2) a significant increase in the bank's non-0% risk-weighted assets, (3) a significant increase in its funding gaps, or (4) a deterioration in its solvency. A downward movement of the bank's BCA could result in a downgrade of all the ratings. BNG Bank's ratings could also be downgraded if the ratings of the Government of Netherlands were to be downgraded.

    This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history.

    2 22 November 2019 BNG Bank N.V.: Update to credit analysis


    Key indicators

    Exhibit 2

    BNG Bank N.V. (Consolidated Financials) [1]

    06-192 12-182 12-172 12-162 12-152 CAGR/Avg.3

    Total Assets (EUR Million) 134,456.0 118,025.0 118,253.0 128,308.0 124,489.0 2.24

    Total Assets (USD Million) 153,118.0 134,919.6 141,997.9 135,333.1 135,231.8 3.64

    Tangible Common Equity (EUR Million) 3,839.0 3,892.0 3,759.0 3,475.0 3,168.0 5.64

    Tangible Common Equity (USD Million) 4,371.8 4,449.1 4,513.8 3,665.3 3,441.4 7.14

    Problem Loans / Gross Loans (%) 0.1 0.1 0.1 0.2 0.1 0.15

    Tangible Common Equity / Risk Weighted Assets (%) -- 32.1 32.3 28.2 24.8 29.36

    Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) 2.4 1.4 1.5 3.9 4.0 2.65

    Net Interest Margin (%) 0.3 0.3 0.3 0.3 0.3 0.35

    PPI / Average RWA (%) -- 3.7 4.2 3.4 3.1 3.66

    Net Income / Tangible Assets (%) 0.2 0.3 0.3 0.3 0.2 0.25

    Cost / Income Ratio (%) 21.4 21.4 18.8 21.5 22.7 21.25

    Market Funds / Tangible Banking Assets (%) 90.3 90.7 91.0 90.4 90.9 90.65

    Liquid Banking Assets / Tangible Banking Assets (%) 15.7 10.8 14.6 17.2 13.9 14.45

    Gross Loans / Due to Customers (%) 1079.3 1466.9 1588.4 1159.4 1301.7 1319.15 [1]All figures and ratios are adjusted using Moody's standard adjustments. [2]Basel III - fully-loaded or transitional phase-in; IFRS. [3]May include rounding differences due to scale of reported amounts. [4]Compound Annual Growth Rate (%) based on time period presented for the latest accounting regime. [5]Simple average of periods presented for the latest accounting regime. [6]Simple average of Basel III periods presented. Source: Moody's Investors Service; Company Filings

    Profile Founded in 1914 and headquartered in the Hague, BNG Bank is a Dutch credit institution specialised in lending to (semi)-publicly owned institutions.

    BNG Bank has no branches and does not provide financing to private customers. The bank's clients are mainly local authorities and public-sector institutions in the area of housing, healthcare, education and public utilities.

    The bank’s shareholders are Dutch public authorities exclusively; 50% of the bank's shares are held by the Dutch State and the remaining 50% are held by municipal authorities, provincial authorities and a district water board.

    Detailed credit considerations BNG Bank is the largest lender to the Dutch public sector, fully owned by Dutch public entities BNG Bank's by- laws restrict its ownership to the Dutch public sector. This ownership structure has been stable since 1925 and is unlikely to change, given the bank's mandate to act as a lender to the Dutch public sector. The bank's long-term loan portfolio was €80.8 billion as of year-end 2018, up slightly from €79.9 billion as of year-end 2017, and total new long-term lending amounted to €11.6 billion in 2018 (€2.1 billion higher than in 2017) and €6.2 billion in the first half of 2019 (a 7% increase year-on-year). The bank's market share of lending to local governments, housing associations and healthcare institutions (core clients) was 71% in terms of long- term lending production in 2018 (stable compared with that in 2017). We expect the bank to maintain its position in the Dutch public- sector financing business, given its mandate, ownership and advantageous funding costs compared with those of commercial banks.

    As a bank established with an explicit public policy mandate, BNG Bank benefits from an entrenched franchise in a niche market. These conditions may result in exceptional stability in terms of asset quality, capital and profitability, supporting the bank's ongoing operating performance and resulting in a very low risk profile. This feature is reflected in a qualitative positive adjustment of one notch in our scorecard.

    High asset quality, reflected in the very low level of NPLs Despite market volatility, BNG Bank has consistently been able to lend to the Dutch public sector at advantageous rates, given the bank's low funding costs compared