July 2, 2012 / 8:21 PM / 5 years ago

TEXT-Fitch affirms Tarjetas Cuyanas S.A.

(The following statement was released by the rating agency)

July 2 - Fitch Ratings has affirmed Tarjetas Cuyanas S.A.'s (TC) ratings as detailed at the end of this release. TC's ratings reflect its strong growth; maintenance of its sound historical profitability, asset quality, and liquidity; and its satisfactory capital base. They also reflect the benefits of belonging to the Tarjetas Regionales Group (owned by Banco de Galicia y Buenos Aires), which is the largest credit card issuer in Argentina and has ample experience in the business. In addition, the potentially volatile operating environment in Argentina and the small size of the company were also factored in the ratings. The low Sovereign ratings add significant ratings compression to most Argentine issuers. Upside rating potential for TC lies in a Sovereign upgrade. Downside potential exists in significant reduction of its capitalization or deterioration in the operating environment affecting TC's asset quality. TC's profitability remains sound and is based on strong revenue generation and growth and healthy asset quality. Fitch expects TC's profitability to remain robust in the medium term. TC's lending has grown significantly in recent years. In 2010, loan growth resumed after a sharp slowdown suffered in 2009 as a result of lower demand and a self-imposed restriction following the economic slowdown. Asset quality ratios have historically been very good considering the bank's activity and the segments served, based on conservative credit limits, good scoring systems and close monitoring of early delinquencies. However, non-performing loans (NPLs) have risen since 2H'2011 due to the economy's slowdown, accounting for a still low 4.15% of total loans at March 31, 2012, and were fully reserved. TC's liquidity is adequate, supported by the short-term nature of its lending. Also, it has had access to capital market funds through bond issuance, interbank lending, and loan securitizations. Exposure to foreign currency risk is low. TC's capital base is adequate, with an equity/assets ratio of 19.22% at March 31, 2012. Despite significant growth, strong internal capital generation has allowed it to maintain a satisfactory capital base. TC is a credit card issuer created in 1996 in the Cuyo region (provinces of Mendoza, San Juan and San Luis) and is now the leading issuer in that region. Since 1996, it has expanded into the west, northwest, and south of Argentina. At March 31, 2012, TC had above 465,000 credit cards issued and 45 branches and commercial offices. TC is 100% owned by Tarjetas Regionales S.A., which is 77% owned by Banco de Galicia y Buenos Aires, the third largest private sector bank in Argentina by deposits. At March 31, 2012, Tarjetas Regionales (TN and Tarjetas Cuyanas S.A.) had 6.6 million credit cards and more than 2.5 million clients. Fitch has affirmed the following ratings for TC: --Long-term local currency Issuer Default Rating (IDR) at 'B'; Stable Outlook; --Short-term local currency IDR at 'B'; --National long-term rating at 'AA-(arg)'; Stable Outlook; --National short-term rating at 'A1(arg)'; --Support rating at '5'; --Unsubordinated fixed-rate notes national long-term rating at 'AA-(arg)'; Stable Outlook; --Short-term notes national short-term rating at 'A1(arg)'. (Caryn Trokie, New York Ratings Unit)

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