Safra Rep Holdings $250 mil Sub Debs Rtd AA- by S&P

Business Wire, Oct 17, 1997

LONDON--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/17/97 -- Standard & Poor's today assigned its double-'A'-minus rating to $250 million in debentures issued by Republic National Bank of New York (Luxembourg) S.A. as fiduciary agent for its parent, Safra Republic Holdings S.A. (SRH) also based in Luxembourg. The debentures have a term of 1,000 years, a coupon of 7.125% and are subordinated to all other liabilities of SRH. The proceeds are to be used for general corporate purposes.

The ratings on SRH, a six-bank holding company, are based on the group's solid asset quality, profitability, and excellent capitalization. The group also enjoys a strong operating, managerial, and strategic connection with Republic New York Corp. (double-'A'/Stable/'A-1'-plus), which owns 49% of SRH. Because of its ownership structure, SRH is subject to consolidated supervision by the U.S. regulatory authorities. Such a close working and regulatory connection is a positive factor in the rating.

SRH's asset quality is good, reflecting the liability-driven nature of its balance sheet. By offering safety and high standards of service, the group attracts the funds of high net worth individuals, which are then invested in high-quality assets such as OECD government securities and interbank deposits.

Vanilla lending facilities, which are extended principally to private bank clients and to client-owned companies, form only a small proportion of SRH's asset base. Furthermore, more than 80% of loans are collateralized or guaranteed by banks or government agencies. Consequently, nonaccrual and restructured loans are well within acceptable limits and loan-loss allowances on a consolidated basis are appropriate. Profitability has been solid and consistent. Earnings are driven by the group's net interest margin, tight cost controls and, increasingly, fee and service charges. This was underlined by the strong 1997 third-quarter results published this week. The group's consolidated capital ratios are high by international standards and are a rating strength.

OUTLOOK Despite an extremely competitive market place, SRH has built up a valuable franchise in less than ten years. Provided that the group's reputation stays intact and standards of service are maintained, its strong capital base should ensure that SRH continues to attract client assets. Earnings, therefore, are expected to remain robust, Standard & Poor's said. - CreditWire

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Peter Dutton, London (44) 171-826-3522

Barry Hancock, London (44) 171-826-3515

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