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TEXT - Fitch affirms Guatemalan Banco G&T Continental ratings
January 22, 2013 / 6:27 PM / 5 years ago

TEXT - Fitch affirms Guatemalan Banco G&T Continental ratings

(The following statement was released by the rating agency)
    Jan 22 - Fitch Ratings has affirmed the Guatemalan Banco G&T Continental's
(G&TC) long-term Issuer Default Rating (IDR) at 'BB'. The Outlook is Stable. A
full list of G&TC's rating actions follows at the end of this press release.

KEY RATING DRIVERS

G&TC's IDRs and Viability Rating reflect its sound niche position and franchise,
good asset quality and efficiency, and ample liquidity relative to similarly 
rated peers. G&TC's ratings also consider its modest capitalization and 
profitability, moderate concentration of loans and deposits, and relatively high
elated party lending.

G&TC's sound asset quality metrics are in line with those of similarly rated 
peers, boosted by the bank's good origination processes, permanent collection 
efforts and charge-off practice. This is reflected in the bank's low impaired 
and restructured loans (1.2% and 1% of gross loans, respectively). The bank's 
debtor concentration is moderate and slightly higher than in previous years, 
while the entity's good reserve cushion covers 1.4x impaired loans and 1.6% of 
gross loans. Fitch does not foresee material changes in the bank's asset quality
for the medium term.

G&TC has sustained a moderate profitability since the pre-crisis years. However,
the decreasing trend in the already low net interest margin has affected the 
bank's bottom line, despite the entity's good efficiency and higher revenues 
originated through double-digits loan growth. For the 2012 fiscal year, the 
bank's returns may be slightly lower than in the years 2009-2011 when the 
average ROAA and ROAE were 1.3% and 16.3%, respectively. The Agency anticipates 
a ROAA slightly above 1.1% for 2013 and double-digit loan growth.

G&TC's capitalization has been moderate and relatively stable during the past 
two years. Fitch's core capital of 13.5% to risk weighted assets is in line with
similarly rated banks. Additionally, G&TC doesn't have material pressures for 
the ultimate parent's reliance on dividends for the short term main, given that 
its main shareholder moderate double-leverage (3Q2012: 112.4%). The strong 
franchise and country-wide network have boosted G&TC's deposits growth, with a 
mix of current and term deposits accounting each for around of 38% of total 
deposits. The bank, however, holds a moderate concentration in the largest 
depositors. 

WHAT COULD TRIGGER A RATING ACTION

The ratings could be upgraded if the bank enhances its financial performance and
sustains returns on assets above 1.5%, coupled with a sustained Fitch Core 
Capital above 14%. On the other hand, severe asset quality deterioration, or a 
material decline in G&TC's financial performance, that affects the bank's 
capitalization, could put downward pressure on the ratings.

CREDIT PROFILE

G&TC was established in 2001 after the merger of the Guatemalan banks Banco 
Granai & Townson and Banco Continental. The bank is mainly corporate oriented. 
The bank is the third largest in terms of assets and deposits, with a market 
share of 20%, and 19.5% respectively, as of September 2012. G&TC is the most 
important subsidiary of Corporacion G&T Continental, a holding company domiciled
in Guatemala, with assets of US$6.4 billion, before eliminations as of September
2012.

Fitch affirms ratings on Banco G&T Continental as follows:
--Long-term IDR at 'BB'; Outlook Stable;
--Short-term IDR at 'B';
--Local-currency long-term IDR at 'BB'; Outlook Stable;
--Local-currency short-term IDR at 'B';
--Viability Rating at 'bb';
--Support at '3';
--Support Rating Floor at 'BB-';
--National scale long-term rating at 'AA-(gtm)'; Outlook Stable;
--National scale short-term rating at 'F1+(gtm)'.

 (Caryn Trokie, New York Ratings Unit)

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