OREANDA-NEWS. Fitch Ratings has revised Santander Totta, SGPS, S.A.'s and Banco Santander Totta, SA's (BST) Outlook to Stable from Positive while affirming their Long-term Issuer Default Rating (IDRs) at 'BBB'. A full list of rating actions is available at the end of this commentary.

The Outlook revision follows that of Portugal's sovereign rating on 4 March 2015 (see "Fitch Revises Portugal's Outlook to Stable; Affirms at 'BB+'", available on www.fitchratings.com).

KEY RATING DRIVERS
IDRS, SENIOR DEBT AND SUPPORT RATING
The IDRs of Santander Totta and its fully owned bank subsidiary, BST, reflect a high probability of support from its Spanish parent bank, Banco Santander, S.A. (Santander; A-/Stable), in case of need. Fitch believes that Santander Totta's activities in Portugal are strategically important to Santander, also recently demonstrated by Santander Totta's acquisition of banking assets and liabilities of Banif in December.

Santander Totta's and BST's Long-term IDRs are capped at two notches above that of the Portuguese sovereign (BB+/Stable), in accordance with Fitch's criteria. In a higher sovereign rating environment, these would be notched down once from the parent's IDR, reflecting common branding, strong synergies and integration with the parent, and a wide range of shared risk management and operational policies and procedures.

Santander Totta is a Portuguese holding company, wholly owned by Santander. BST is it main operating subsidiary in Portugal. The ratings of Santander Totta and BST are equalised because the two are regulated as a consolidated entity in Portugal, the bank is wholly owned by the holding company and the holding company has a moderate double leverage ratio, considering the capital restructuring plan of Portuguese entities.

The Stable Outlook reflects that of the sovereign.

Available support from the parent is reflected in the higher of the two possible Short-term IDRs for banks with a Long-term IDR of 'BBB'.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
BST's preference shares are capped at the rating on equivalent securities issued by the parent. In Fitch's view support from the parent mitigates the non-performance risk of the instruments. Therefore, the agency would only notch down the rating of the preference shares twice for loss severity from the subsidiary's IDR if the cap was not applied.

RATING SENSITIVITIES
IDRS, SENIOR DEBT AND SUPPORT RATING
At current levels, the IDRs of Santander Totta and BST are sensitive to a change of the sovereign rating. The IDRs and the SR are also sensitive to a change in Fitch's assumptions around Santander's propensity or ability to support its Portuguese subsidiary. The IDR of Santander Totta is also sensitive to an increase in double leverage.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
BST's preference shares are sensitive to a change in Santander's IDR. The rating will be withdrawn once these are amortised, expected by mid-March.

The rating actions are as follows:

Santander Totta:
Long-term IDR affirmed at 'BBB'; Outlook revised to Stable from Positive
Short-term IDR affirmed at 'F2'
Viability Rating unaffected at 'bb+'
Support Rating affirmed at '2'

BST:
Long-term IDR affirmed at 'BBB'; Outlook revised to Stable from Positive
Short-term IDR affirmed at 'F2'
Viability Rating unaffected at 'bb+'
Support Rating affirmed at '2'
Senior unsecured debt affirmed at 'BBB'
Commercial paper affirmed at 'F2'
Preference shares affirmed at 'BB'