March 1, 2017 / 5:00 PM / 5 months ago

Fitch Affirms Argentina's Banco Supervielle's IDR at 'B'; Outlook Stable

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(The following statement was released by the rating agency) NEW YORK/SANTIAGO, March 01 (Fitch) Fitch Ratings has affirmed Banco Supervielle S.A.'s (Supervielle) Foreign and Local Currency Long-Term Issuer Default Ratings (IDRs) at 'B'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this press release. KEY RATING DRIVERS - VR AND IDRs Banco Supervielle's Viability Rating (VR) and IDRs are driven by the still adverse economic and operating environment, albeit some structural recent improvements of Argentina's policy framework could benefit the bank's performance. The ratings also consider the bank's improved capitalization, its sound and stable asset quality, adequate profitability and funding and liquidity profile, and gradually strengthening franchise. In Fitch's view, regardless of its overall adequate financial condition, Supervielle's ratings are currently capped by the sovereign rating. Although the new government is taking measures in the right direction and reducing political and regulatory intervention into the banking system, the local environment in Argentina is still characterized by ample economic imbalances and measures are being taken gradually and, therefore, the recovery of the economy is taking time to materialize. Supervielle is a medium-sized bank with roughly 2.66% of the system's loans (ranks 13th) and 1.90% of deposits as of November 2016, but it is gradually improving its competitive position in core business lines. It has a strong presence in factoring, leasing, and retail loans, with a particularly sound regional franchise in certain provinces. Although sound and recurrent core earnings are among Supevielle's strengths, its profitability ratios are under some pressure mainly due to rising costs and higher loan loss provisions. Fitch believes that Supervielle will continue recording adequate profitability metrics based on its expanding portfolio's capacity to generate operating income. In addition, the normalization of the regulatory environment will likely benefit the bank's revenues once the economy recovers as most of the distorting regulatory measures taken by the previous Government have been removed and now allows the bank to resume growth in the lower segments. Fitch considers that Supervielle's asset quality is adequate. However, at a consolidated level, Supervielle's impairments are somewhat higher than that of the Argentine financial system, which is explained by its relevant consumer finance business through its subsidiary Cordial Compania Financiera. As with the rest of the financial system, Supervielle's asset quality is slowly deteriorating due to the adverse economic conditions, a trend Fitch expects to continue in the medium term as the economic recovery will likely be seen towards the second half of 2017. At Dec. 31, 2016, Supervielle's non-performing loans (NPLs) ratio was 2.78% of total loans, compared to 3.18% at Dec. 31, 2015, and 1.8% for the system at Dec. 31, 2016. Although the bank's NPLs have decreased since December 2015, this is largely explained by higher charge-offs, which rose to 0.75% of total loans at Dec. 31, 2016 (from -0.59%). Supervielle's capital adequacy is adequate and improved significantly after the Supervielle Group issued USD250 million in fresh capital through an IPO in the Buenos Aires and New York stock exchanges in May 2016, and most of the capital raised was allocated in the bank. As of Sept. 30, 2016, the bank's Fitch core capital to risk-weighted assets and its tangible common equity to tangible assets ratio improved to 11.45% and 12.34%, respectively, significantly above the figures shown at Dec. 31, 2015 (7.71% and 7.22%). SENIOR UNSECURED DEBT The long-term rating of Supervielle's senior unsecured debt issuance is at the same level as the bank's Long-Term Local Currency IDR considering the absence of credit enhancement or subordination feature. The recovery rating of 'RR4' assigned to Supervielle's senior debt issuance reflects the average expected recovery in case of bank liquidation. SUBORDINATED DEBT The 'B-/RR6' rating of Supervielle's subordinated debt reflects that these securities are plain-vanilla subordinated liabilities, without any deferral feature on coupons and/or principal. Therefore, these are notched only once to reflect the below average expected recoveries for these bonds in case of bank liquidation and the high compression arising from the low VR of the issuer. SUPPORT RATING AND SUPPORT RATING FLOOR Supervielle's SR of '5' and SRFs of 'NF' reflect that, although possible, external support for this bank, as with most Argentine banks, cannot be relied upon given the ample economic imbalances. In turn, the sovereign ability and willingness to support banks is highly uncertain. RATING SENSITIVITIES - IDRs AND VR Given their low level, Supervielle's ratings would move in line with any change of Argentina's sovereign rating. In addition, Supervielle's ratings could be affected if the operating environment drives a material deterioration in its financial profile. Under current circumstances, Fitch considers unlikely that Argentine banks could be rated above the sovereign. Therefore, upside potential in the Supervielle's ratings is heavily contingent upon positive developments in the sovereign rating dynamics. SENIOR UNSECURED DEBT The rating for Supervielle's new debt issuance would move in line with the bank's Long-Term IDR. SUBORDINATED DEBT The rating of the subordinated debt will likely remain one notch below Banco Supervielle's VR under most circumstances, meaning that this issue rating would move accordingly with any change in the bank's VR. SUPPORT RATING AND SUPPORT RATING FLOOR Changes in the SRs and SRFs of Supervielle are highly unlikely in the foreseeable future. Fitch has affirmed the following ratings: Banco Supervielle: --Foreign and Local Currency Long-Term IDRs at 'B'; Outlook Stable; --Foreign and Local Currency Short-Term IDRs at 'B'; --Viability Rating at 'b'; --Senior unsecured notes at 'B/RR4'. --Subordinated debt at 'B-/RR6'; --Support at '5'; --Support Floor at 'NF'. Contact: Primary Analyst Esin Celasun Director +55 21 4503 2626 Fitch Ratings Brasil Ltda. Praca XV de Novembro, 20, Sala 401-B Rio de Janeiro, Brazil Secondary Analyst Santiago Gallo Director +56 2 2499 3320 Committee Chairperson Theresa Paiz Fredel Senior Director +1-212-908-0534 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1019894 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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