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Fitch Affirms Argentina's Banco Santander Rio's IDR at 'B'; Outlook Stable
March 1, 2017 / 4:10 PM / 9 months ago

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

(The following statement was released by the rating agency) RIO DE JANEIRO/NEW YORK, March 01 (Fitch) Fitch Ratings has affirmed Banco Santander Rio S.A.'s (Santander Rio) Viability Rating (VR) and local currency (FC) long-term Issuer Default Rating (IDR) at 'b' and 'B', respectively. 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 Santander Rio's ratings are driven by the still volatile and adverse economic and operating environment, albeit some structural recent improvements of Argentina's policy framework could benefit the bank's performance in the medium term. Santander Rio's ratings benefit from its strong and growing franchise as the largest private sector bank in the country and the ample experience of its main shareholder, Spain's Banco Santander S.A. (Santander; 'A-'/Outlook Stable), although the ratings do not factor any extraordinary support from its parent. In Fitch's view, regardless of Santander Rio's overall sound financial condition, its ratings are currently capped by the LC 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 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. Santander Rio is a universal commercial bank with a strong position in most market segments. It is the largest private bank measured by loans and deposits, with market shares of 9.9% and 8.7% respectively as of Nov. 30, 2016. Santander Rio's profitability is adequate although, like the rest of the financial system, has been under pressure affected by slower loan growth and high inflation. Net fees and commissions income is a key strength of Santander Rio's, covering roughly 50% of non-interest expenses. Like the main banks in the system delinquency remains at historically low levels, aided by loan growth and inflation. Thus, non-performing loans (NPL) of Santander Rio represented a low 1.2% of the total loan portfolio, while loan reserves covered 1.31 times NPL. The bank's capital adequacy metrics stand at adequate levels, albeit lower than its closest peers in part due to stronger loan growth. The Fitch core capital to risk-weighted assets ratio stood at 11.8% as of Sept. 30, 2016, showing a declining trend due to the strong growth in lending in recent years. Santander Rio's main funding source is core customer deposits and its liquidity levels are ample and benefit from strong deposit growth and low demand of long term credit. SUPPORT RATING The Support Rating of '5' reflects that, although possible, external support for Santander Rio from Spain's Santander, cannot be relied upon given the high political interference risk and ample economic imbalances. RATING SENSITIVITIES - IDRs AND VR Santander Rio's ratings would move in line with any change of Argentina's sovereign rating. Also Santander Rio's ratings could be affected if the difficult operating environment drives material deterioration in asset quality, earnings, and/or loss absorption capacity. Under current circumstances, Fitch considers unlikely that Argentine banks could be rated above the sovereign. Therefore, upside potential in Santander Rio's ratings is heavily contingent upon positive developments in the sovereign rating dynamics. SUPPORT RATING Changes in the SR of Santander Rio are highly unlikely in the foreseeable future. Fitch has affirmed Santander Rio's ratings as follows: --Local Currency Long-Term IDR at 'B'; Outlook Stable; --Viability rating at 'b'; --Support Rating at '5'. 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: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1019889 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. 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