March 1, 2017 / 9:31 PM / in 8 months

Fitch Affirms BBVA Banco Frances's IDR at 'B'; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, March 01 (Fitch) Fitch Ratings has today affirmed BBVA Banco Frances S.A.'s (BBVA Frances) Viability Rating (VR) at 'b' and its long-term local currency Issuer Default Rating (IDR) at 'B'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS VR AND IDR Despite recent improvements in Argentina's economic policy framework and normalizing relations with foreign creditors, the still adverse operating environment is the principal driver of BBVA Frances's VR and IDR. In Fitch's view, a reduction in regulatory risk, a correction of macroeconomic imbalances and economic recovery, will take time to materialize. BBVA Frances's ratings consider the bank's integration into the global risk management policies and procedures of its main shareholder, Spain's Banco Bilbao Vizcaya Argentaria (BBVA; 'A-'/Outlook Stable). They also factor in BBVA Frances's strong franchise and position as the country's third largest private lender with a market share of 5.8% of banking system assets at November 2016. BBVA Frances' asset quality remains sound, comparing favourably to peers. NPLs increased modestly to 0.85% as of September 2016 (0.66% at December 2015). Like the rest of the Argentine banking system, loan quality indicators are supported by strong credit growth. At BBVA Frances, loan portfolio grew on average 26.3% annually from 2012 to 2015 BBVA Frances's reserve coverage remains high at 248.6% of impaired loans at September 2016. In terms of profitability, an uptick in the proportion of earning assets, improved contribution of non-interest income, as well as controlled administrative costs, helped offset a moderate decline in net interest margin to 7.9% at September 2016 (8.7% at year-end 2015). Operating profitability has remained relatively stable, averaging 6.6% of risk weighted assets from 2012 to 2015. BBVA Frances' capital indicators, while adequate, have come under pressure due to high annual asset growth which has exceeded the bank's internal capital generation by four percentage points on average from 2012 to 2015. Fitch estimates that solid profitability will permit capitalization levels to remain adequate. The bank's main funding source is core customer deposits, accounting for 84% of funding at September 2016. The largest proportion consists of term deposits (41.4%), followed by savings accounts (37.4%). The bank's liquidity buffers have modestly declined but remain ample. Liquid assets covered 52.6% of customer deposits at September 2016 (61.3% at year-end 2015). SUPPORT RATING The bank's Support Rating of '5' reflects that, although external support for BBVA Frances from Spain's BBVA is possible, it cannot be relied upon, in Fitch's view, given country risks in Argentina. RATING SENSITIVITIES VR AND IDR BBVA Frances's VR and IDR would likely move in line with a downgrade of Argentina's sovereign rating. In addition, the bank's ratings could be affected in the event of a material deterioration in asset quality, earnings, and/or loss absorption capacity. Fitch considers it unlikely that Argentine banks could be rated above the sovereign, making any upside potential in BBVA Frances's ratings contingent on positive developments in the sovereign rating. SUPPORT RATING Changes to BBVA Frances's support rating are highly unlikely in the foreseeable future. Fitch has affirmed BBVA Banco Frances S.A.'s ratings as follows: --Local Currency Long-term IDR at 'B'; Outlook Stable; --Viability Rating at 'b'; --Support Rating at '5'. Contact: Primary Analyst Mark Narron Director +1-212-612-7898 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Robert Stoll Director +1 212-908-9155 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=1019921 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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