CHILE, Aug. 2, 2009 (Info-Prod Research) -- Moody's Investors Service has downgraded the local currency deposit ratings of Banco Santander Chile (NYSE:SAN) (Santander Chile) to Aa3 from Aa2, following the downgrade of the parent (OOTC:KIDSQ) bank, Banco Santander S.A.'s (Santander S.A.) bank financial strength rating (BFSR) to B-minus from B, and its baseline credit assessment (BCA) to A1 from Aa3. Moody's also lowered Santander Chile's foreign currency senior and subordinated debt ratings to Aa3 and A1, respectively, from Aa2 and Aa3, as they are derived from the local currency rating. At the same time, Moody's confirmed Santander Chile's B-minus BFSR, with a stable outlook. These actions complete the review of BSC's ratings initiated on May 20, 2009. All these ratings now have a stable outlook. At the same time, Moody's affirmed Santander Chile's A1 and Prime-1 long and short term foreign currency deposit ratings with a positive outlook. These ratings remain constrained by the A1 country ceiling for foreign currency deposits for Chile that also has a positive outlook. The rating actions follow Moody's downgrade of the bank's Spanish parent Banco Santander S.A.'s (Santander S.A.) bank financial strength rating announced on July 30, 2009 (for details please refer to Moody's press release "Moody's Lowers Banco Santander One Notch to Aa2 and Banesto to Aa3"). Moody's said that its deposit and debt ratings for the Chilean subsidiary incorporate an assessment of the probability of support by Santander S.A.; these ratings are derived from the parent's B- BFSR and A1 baseline credit assessment. Moody's however indicated that Santander Chile's deposit and debt ratings continue to benefit from one notch of uplift from its A1 BCA due to the assumption of a very high probability of systemic support for the bank's local currency obligations in situations of high stress, which is explained by the importance of the bank's deposit and loan franchise within the Chilean market. In confirming Banco Santander Chile's B- bank financial strength rating, Moody's noted that the bank's leading franchise and strong earnings and capital profile position the bank well to absorb both expected and unexpected losses in the context of Chile's current economic downturn. In this regard, Moody's anticipates pressures on the bank's higher exposure to the consumer and SME segment than its peers. Moody's also said that Santander Chile's stand-alone financial strength derives from its focus on the domestic market as well as from a strong core earnings generation capacity, solid local funding profile, and consistently strong capitalization. Its franchise potential and financial track record continue to position it well within its rating category relative to both regional and global peers.
