August 2, 2010

Fitch Ratings maintains Caixa Galicia financial strength rating

Long-term rating changes from BBB + to BBB and short term from of F2 to F3

The Galician bank increased solvency by 26% since the previous Fitch rating.

Today, Fitch Ratings decided to maintain Caixa Galicia financial ratings, with financial strength of C, the same level as that issued by the British agency in March 2009. Fitch gave Caixa Galicia a long-term rating of BBB (previously BBB+) and a short-term rating of F3 (from F2). In its assessment of Caixa Galicia, the agency assesses the Spanish economic context as negative, due to high rates of unemployment, the increase in public debt and high dependence on external funding.

As with the rest of Spanish banks that Fitch qualified recently, the agency stresses that the Galician bank is "negatively affected by the weakness of the Spanish economy." Fitch takes into account the merger process that Caixa Galicia has commenced with Caixanova and if it is completed in the 4th quarter of 2010 as planned, will review the resulting entity.

Fitch rates Caixa Galicia credit quality as good and maintains its qualification of the entity as that of investment grade, indicating that risk expectations are low and that ability to pay is adequate. The British agency said in its report that Caixa Galicia has reduced the concentration of risk and improved liquidity and capitalization in an environment complicated by low interest rates, adverse conditions in the Spanish economy and rapidly increasing unemployment. The report states that the growth of the Galician bank solvency has placed its Tier 1 at 8.42% in June this year - growth of 26% since the previous rating.

Fitch highlights the advances in liquidity and funding sources from retail customer deposits, the reduction of mainly short term wholesale funding and the increase in European Central Bank eligible assets. Fitch affirms that the entity will not have problems to deal with redemptions scheduled for 2010-2012. Caixa Galicia's liquidity is 7,122 million euros. Caixa Galicia is the sixth largest Spanish caja in terms of assets and is present in all the Spanish provinces through its network of 827 branches. Source: