Reuters logo
Fitch Downgrades Salvadorian Banks after Sovereign Downgrade; Outlook Revised to Negative
February 10, 2017 / 7:23 PM / 8 months ago

Fitch Downgrades Salvadorian Banks after Sovereign Downgrade; Outlook Revised to Negative

(The following statement was released by the rating agency) MONTERREY/SAN SALVADOR, February 10 (Fitch) Fitch Ratings has today downgraded the Long-Term Issuer Default Ratings of Banco Agricola, S. A. (Agricola) and Banco Davivienda Salvadoreno, S.A. (Davivienda Sal) to 'BB-' from 'BB'. The Rating Outlooks are revised to Negative from Stable. Fitch has also downgraded Agricola's Viability Rating (VR) to 'b' from 'bb-', and Davivienda Sal's VR to 'b' from 'b+'. The banks' Short-Term IDRs were affirmed and the National ratings are unaffected. A full list of rating actions is at the end of this rating action commentary Fitch's rating actions and Outlook revisions follow the recent downgrade of El Salvador's sovereign rating to 'B' from 'B+', its Sovereign Rating Outlook revision to Negative from Stable, as well as the country ceiling downgrade to 'BB-' from 'BB'. The downgrade reflects El Salvador's harsh political environment that has imposed additional limits to the government's financing options as well its ability to take further measures to restore public finances, while the Negative Outlook reflects the persisting risks to meeting financing needs for 2017 in the absence of a political agreements. (See "Fitch Downgrades El Salvador's IDR to 'B'; Outlook Revised to Negative", dated Feb. 1, 2017, at 'www.fitchratings.com'.) The National scale ratings of these banks and the ones related to their respective local holding companies in El Salvador (Inversiones Financieras Banco Agricola, S.A. and Inversiones Financieras Davivienda, S.A.) remain unaffected, as national ratings are local relative rankings of creditworthiness within a particular jurisdiction, and the relative strengths and weaknesses remain unchanged. KEY RATING DRIVERS IDRS AND SUPPORT RATINGS (SRs) The IDRs of Agricola and Davivienda Sal are driven by the support of their respective parents, both rated above the El Salvador sovereign (Bancolombia and Banco Davivienda (Davivienda) at 'BBB'/Outlook Negative). The IDRs of Agricola and Davivienda Sal have been downgraded to 'BB-' as they are constrained by El Salvador's country ceiling of 'BB-'. The rating downgrades do not imply any changes in Fitch's assessment of their respective parent's capacity or propensity to provide support to their subsidiaries, should it be required. The SRs of both banks are affirmed at '3' given that Fitch's assessment of the probability of support to these banks by the respective shareholders is moderate. The agency's opinion is based on the relative importance of the operations in Central America to their respective parents, and on the significant reputational risk that default would pose to their respective parents. VR Agricola's and Davivienda Sal's VRs have been downgraded to reflect the high influence of the operating environment in the banks' performance and prospects and its high exposure to El Salvador's debt. While Agricola's VR was above the sovereign, the current rating action reflects that both Agricola and Davivienda's VRs are intrinsically linked to a worsened economic situation in El Salvador. As per Fitch's criteria, banks are rarely rated above the sovereign and, in the agency's opinion, the deteriorated Salvadorian operating environment constrains these banks' ratings to the sovereign's creditworthiness. Agricola's VR is also moderately influenced by its sound financial performance, asset quality above local peers and still-good capital base. The institution maintains a leadership position in the Salvadorian market and a stable and granular deposit base, which is the core of its funding structure. Davivienda's VR is moderately influenced by its modest profitability, aligned with industry average, sound but decreasing capital position, and adequate asset quality. Davivienda's funding profile is robust, also underpinned by a large and granular deposit base. AGRICOLA SENIOR TRUST The LT-IDR of Agricola Senior Trust's (AST) loan participation notes was downgraded to 'BB-' to 'BB'. The rating of the notes is at the same level of Agricola's Long-Term IDR, reflecting that the notes are AST's senior obligations, secured by the trust's sole asset, a 100% participation in a senior unsecured loan from Bank of America N.A. to Agricola. RATING SENSITIVITIES IDRs and VRs Agricola's and Davivienda Sal's IDRs are sensitive to a change in the El Salvador Sovereign Rating and Country Ceiling. The Negative Outlook implies that any negative rating action on the sovereign would also lead to a similar action on Davivienda, Agricola and Agricola Senior Trust's IDRs and in both banks' VRs. SUPPORT RATING The SR is potentially sensitive to any change in assumptions around the propensity or ability of Bancolombia and Banco Davivienda to provide timely support to their respective subsidiaries. This scenario is unlikely given the relative strength of both banks relative to the El Salvador Sovereign rating. The rating actions are as follows: Banco Agricola, S.A. --Long-Term IDR downgraded to 'BB-' from 'BB'; Outlook revised to Negative from Stable; --Short-Term IDR affirmed at 'B'; --Viability Rating downgraded to 'b' from 'bb-'; --Support Rating affirmed at '3'. Agricola Senior Trust --Loan participation notes downgraded to BB- from BB. Davivienda Salvadoreno, S.A. --Long-Term IDR downgraded to 'BB-' from 'BB'; Outlook to Negative from Stable; --Short-Term IDR affirmed at 'B'; --Viability Rating downgraded to 'b' from 'b+'; --Support Rating affirmed at '3'. Contact: Primary Analyst Monica Ibarra Director +52 (81) 8399-9150 Fitch Mexico, S.A. de C.V. Prol. Alfonso Reyes 2612 Monterrey, N.L. Mexico Secondary Analysts (Davivienda Sal) Rolando Martinez Director +503 2516 6616 Marcela Galicia (Agricola) Director +503 2516 6619 Committee Chairperson Claudio Gallina Senior Director +55 11 4504-2216 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 Future Flow Securitization Rating Criteria (pub. 14 Sep 2016) here Global Bank Rating Criteria (pub. 25 Nov 2016) here Global Non-Bank Financial Institutions Rating Criteria (pub. 15 Jul 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1018867 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. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below