Capital/Financing Update • Oct 11, 2021
Capital/Financing Update
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11 OCT 2021
Fitch Ratings - London - 11 Oct 2021: Fitch Ratings has assigned Bank Hapoalim B.M.'s (Hapoalim; A/ Stable/a-) US dollar Tier 2 notes an expected rating of 'BBB(EXP)'. Hapoalim's other ratings are unaffected by this rating action.
The notes have been rated under Fitch's "Exposure Draft: Bank Rating Criteria" published on 17 August 2021.
The assignment of a final rating is contingent on the receipt of final documents conforming to the information already received.
Hapoalim's Tier 2 notes' rating is two notches below the bank's Viability Rating (VR), reflecting poor recovery prospects in the event of a failure of the bank, in line with Fitch's base-case notching for Tier 2 debt. No additional notching is applied as in our opinion the principal loss absorption feature after a breach of a 5% common equity Tier 1 (CET1) ratio gives rise to low incremental non-performance risk relative to the bank's VR.
The Tier 2 notes rank pari passu with the bank's other Tier 2 debt. The notes will be converted to equity partially or in full if Hapoalim's CET1 ratio falls below 5% or if Hapoalim's regulator, the Bank of Israel, notifies Hapoalim in writing that the conversion of the debt is necessary to avoid becoming non-viable, or if a capital injection is needed from the public sector, or equivalent support, to avoid the point of non-viability. There is no coupon flexibility on the notes.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The Tier 2 notes' rating would likely be downgraded if the bank's VR is downgraded.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The Tier 2 notes' rating would likely be upgraded if the bank's VR is upgraded.
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sectorspecific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/ 10111579
The principal sources of information used in the analysis are described in the Applicable Criteria.
Managing Director Primary Rating Analyst +44 20 3530 1012 Fitch Ratings Ltd 30 North Colonnade, Canary Wharf London E14 5GN
Associate Director Secondary Rating Analyst +44 20 3530 2723
Senior Director Committee Chairperson +49 69 768076 123
London +44 20 3530 2452 [email protected]
| ENTITY/DEBT | RATING | RECOVERY | PRIOR | |
|---|---|---|---|---|
| Bank Hapoalim B.M. |
| ENTITY/DEBT | RATING | RECOVERY | PRIOR | ||
|---|---|---|---|---|---|
| • subordinated LT |
BBB(EXP) | Expected Rating |
|||
| RATINGS KEY | OUTLOOK | WATCH | |||
| POSITIVE | |||||
| NEGATIVE | |||||
| EVOLVING | |||||
| STABLE |
Exposure Draft: Bank Rating Criteria (pub.17 Aug 2021) (including rating assumption sensitivity)
Bank Hapoalim B.M. UK Issued, EU Endorsed
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