Fitch: Banco BPI Voting Changes Positive for Portugal Banks
Once CaixaBank takes full control of BPI, it will be easier to implement strategic changes that are essential to boost profitability and strengthen the latter's credit profile. Until last week's vote, CaixaBank held 45.16% of BPI, but its voting rights were capped at 20%.
Addressing the voting rights problem was a precondition for the take-over. Now that this has been achieved we believe there is a high probability that the transaction will be completed. Approval is still required from various authorities, including the ECB and Portuguese and Angolan regulators, but we do not expect the authorities to raise objections. Final timing for the take-over is still uncertain.
A successful take-over will have positive implications for BPI's ratings in the short to medium term. If CaixaBank takes control, we may incorporate potential institutional support into BPI's ratings. CaixaBank's ability to provide such support is reflected in the bank's 'BBB'/Positive rating and we will also factor in CaixaBank's propensity to support BPI. The agency anticipates that BPI could be rated up to two notches below CaixaBank, taking into account sovereign rating constraints.
We expect CaixaBank to implement the restructuring plan announced in April and cut BPI's operating costs by around 13% from the third year after consolidation. We view this positively because maintaining cost efficiency in the persistently low interest rate environment is crucial for Portuguese banks, particularly as economic growth is set to slow in 2H16 and 2017.
CaixaBank sold 9.9% of its own shares for EUR1.3bn on 22 September to fund the BPI acquisition. CaixaBank calculates that, if it achieves 100% control of BPI, its end-June 2016 pro forma fully loaded common equity Tier 1 capital ratio will fall from 11.5% at end-June 2016 to 10.8%. But we think acceptance levels will be below 100% which, alongside internal capital generation, might mean the ratio remains above 11%.
BPI's board also made a proposal to Unitel, its Angolan partner in Banco de Fomento Angola (BFA), that the latter acquire an additional 2% stake in BFA for EUR28m and to make changes to a shareholders' agreement. The proposal, subject to approval by BPI's shareholders, will reduce BPI's stake to below 50% and could mean that full consolidation is no longer required if supervisory approval is granted. This would address the bank's current breach of its large exposures limit, reducing the risk of potential sanctions from the ECB.