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Moody's downgrades Bank Millennium Following a Similar Rating Action on the Portuguese parent

December 14, 2012
London, 14 December 2012 -- Moody's Investors Service has today downgraded Polish Bank Millennium's (BM) long- term bank deposit rating by two notches to Ba2 from Baa3 and the standalone bank financial strength rating (BFSR) to E+ (mapping to b1 on the long-term scale) from D/(ba2). Short-term bank deposit rating was also downgraded to non-Prime from Prime-3.

Concurrently, Moody's maintains a negative outlook on BM's long-term rating in line with the parent bank's standalone.

The rating action follows the downgrade of the ratings of BM's parent Banco Comercial Portugues, S.A. (BCP) to B1/E (mapping to caa2) from Ba3/E+ (mapping to b2). (For additional information on BCP's ratings see relevant press release dated 4 December 2012: http://www.moodys.com/research/Moodys-takes-actions-on-three-Portuguese-banks-BCP-Banif-and--PR_260886).


The downgrade of BM's stand-alone ratings to E+ (mapping to b1 on the long-term scale) from D/ba2 is driven by potential indirect reputational linkages with the parent and the potential detrimental effect on the Polish subsidiary's franchise from the parent's weak condition. In Moody's view the severe deterioration of BCP's standalone creditworthiness could elevate the level of stress within the group and ultimately present contagion risks for its performing Polish subsidiary. This reflects Moody's general opinion that the standalone creditworthiness of parent banks and their subsidiaries cannot be fully delinked.

Moody's also recognises, however, the independence of BM's Polish operations, and as a result maintains its standalone credit assessment (BCA) at b1, four notches above its parent's BCA of caa2. This degree of notching differential between the BCAs of the parent and its subsidiary is one of the highest among European banks.

The rationale of such a differential is based on the following considerations: a) the limited operational inter-linkages between BM and BCP, given BM's purely domestic focus within Poland and no common clientele with its parent; b) BM's full funding independence from its parent and a strategy which involves gradual de-risking of the balance sheet; c) BM did not distribute any dividends to its parent in 2012 and any future capital payment plans will be closely monitored in compliance with strict guidelines set by the Polish regulatory authority (KNF). These factors, together with BM's satisfactory earnings performance and its solid capitalisation, support Moody's decision to maintain such a multi-notch stand-alone rating differential with its parent.

BM's long-term rating at Ba2 continues to incorporate two notches uplift from systemic support assumptions and reflects Moody's expectations of a high probability of support from the Polish authorities to the third largest mortgage lender in the country.

What can change rating up/down

Given the recent rating action and review for downgrade on the stand-alone and supported ratings of BM an upgrade is unlikely in the short-term. However, change of ownership and further reduction of BM's association with the underperforming Portuguese group could represent an important factor for such consideration.

A downgrade in BM's ratings could be triggered by a further downgrade of the parent's stand-alone credit assessment, or a deterioration of its own intrinsic credit characteristics.

The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.


For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following : parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Irakli Pipia
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Yves J Lemay
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Company — Bank Millennium
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    Bank Millennium S.A.
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