Moody’s raises credit rating of Novo Banco by two notches; still junk
Despite this upward revision of the rating, the bank's debt is classified by the rating agency as a "speculative investment" and thus still as 'junk'.
Moody’s has raised its credit rating for the debt of Novo Banco, the Portuguese bank that is the successor institution to Banco Espírito Santos, by two notches, to ‘speculative investment’ from the previous ‘high risk of default’, and with a positive outlook, although the debt is still classed as ‘junk’, that is, below investment grade.
In a statement sent to Portugal’s Securities Markets Commission (CMVM) on Tuesday, Novo Banco said that Moody’s had raised the ratings of its long-term senior unsecured debt to B3 (the sixth lowest level out of 21) from Caa2, and of its long-term deposit, to Ba3 from B2.
The rating agency also raised the baseline credit assessment of Novo Banco by two levels, to b2 from caa1, keeping the outlook positive for its long-term deposit and long-term senior unsecured debt.
According to Novo Banco, The multi-notch upgrade in credit rating from Moody’s reflects novobanco’s “improved credit profile as a result of the continued de-risking of its balance sheet and the significant restructuring of its operations over recent years” – quoting the Moody’s release.
“In the rating action announced today, Moody’s has also considered that novobanco ‘publicly stated strategic plan and targets as well as the confirmation of a continued and stable return to profitability, which have helped dissipate some concerns about the viability of the bank’s franchise,” it adds.
Despite this upward revision of the rating, the bank’s debt is classified by the rating agency as a “speculative investment” and thus still as ‘junk’.