Reuters logo
Fitch Affirms Banco Agromercantil's Ratings Following Peer Review
May 9, 2017 / 10:14 PM / 7 months ago

Fitch Affirms Banco Agromercantil's Ratings Following Peer Review

(The following statement was released by the rating agency) MONTERREY, May 09 (Fitch) Fitch Ratings has affirmed Banco Agromercantil de Guatemala's (BAM) Long-Term Issuer Default Rating (IDR) at 'BB+' following a peer review of Guatemala's largest banks. The Rating Outlook is Stable. See the full list of rating actions at the end of this release. KEY RATING DRIVERS BAM - IDRS, VR, NATIONAL RATINGS AND SUPPORT RATINGS BAM's IDRs and national ratings reflect Fitch's opinion that the support from its ultimate shareholder, Bancolombia ('BBB'/ Outlook Negative) will be timely and sufficient if needed. In Fitch's opinion, Bancolombia's capacity and propensity to support BAM considers that any required support would be manageable relative to the ability of the parent to provide it, and the high reputational risks to the parent in the event of subsidiary default. Fitch's view factors in the low cost of potential support, as BAM accounts for 4.7% of the group's assets. BAM's standalone creditworthiness, as indicated by its Viability Rating (VR), is driven by its company profile based on its moderate franchise in Guatemala combined with its consistent and proven business model that allows the bank to maintain a stable performance and prospects. The VR also considers the bank's pressured capital position, good asset quality, diversified and stable funding, as well as its moderate profitability. BAM's capital position is adequate but has been pressured recently. The bank's capital buffers have declined to the lowest point in the last four years as credit growth has outpaced internal capital generation. As of December 2016, the Fitch Core Capital ratio was 10.9%. BAM's asset quality is still good despite some moderate deterioration in 2016. Loans past due more than 90 days reached 1.8% of gross loans (2015: 1.4%), the highest point in the last four years, but still in line with the bank's current ratings. The deterioration was mainly from retail loans. Credit cards were hit due to temporary regulation changes that disrupted the credit card portfolio performance across the system. The deterioration also reflected the bank's increased risk appetite given its higher proportion of retail loans in recent years, though management expects this deteriorating trend to improve in the short term due to the implementation of tighter controls and underwriting standards for this segment.. Modest profitability is prevalent in the largest Guatemalan banks with no significant retail portfolio. BAM's modest profitability is the product of a continuously constrained margin due to competition. The net interest margin (NIM) continues to be pressured by the increased funding costs and heightened competition, leading to lower profitability. BAM's funding structure is deposit-based and has a good track record of stability. Despite not having a comparable franchise in the deposit sector relative to larger banks, BAM's deposits are well diversified, in Fitch's view. As of YE16, the 20 largest depositors represented 8.1% of total deposits, comparing favorably to local peers. The bank's funding is complemented by an ample and diversified number of wholesale sources. The bank has 23 open credit lines (14 of them in use) from international financial institutions. AGROMERCANTIL SENIOR TRUST (AST) Agromercantil Senior Trust's (AST) rating is in line with BAM's IDR reflecting that the senior unsecured obligations rank equally with the bank's unsecured and unsubordinated obligations. MERCOM - NATIONAL RATINGS Mercom's national ratings are based on the support it would receive from its ultimate shareholder, Bancolombia, if needed. Mercom is an important subsidiary for the group in Guatemala given that it operates in complementary market segments - enhancing BAM's business model - and reflects a high degree of integration. RATING SENSITIVITIES BAM IDRS, VR, NATIONAL RATINGS AND SUPPORT RATINGS BAM's Foreign Currency IDR is capped by Guatemala's country ceiling. The bank's Long-Term Local Currency IDR is above the sovereign's Local Currency IDR and as such would be sensitive to any sovereign rating action. Downward risk for the bank's IDRs, national ratings and support rating is limited given its parent support but the ratings could be downgraded if Fitch's assessment of Bancolombia's ability or willingness to support its subsidiaries changes. Currently, there is no upside potential for the bank's IDRs as these are above the sovereign's IDRs, which have a Stable Outlook. The VR could be downgraded if the Fitch Core Capital ratio consistently falls below 10%. AST Changes in the notes' rating would derive from changes in BAM's IDR. MERCOM A downgrade in Mercom's ratings is contingent on Bancolombia's ability and propensity to support its operations if needed. Fitch has affirmed the following ratings: Banco Agromercantil de Guatemala, S.A. --Long-Term Foreign Currency IDR at 'BB+'; Outlook Stable; --Short-Term Foreign Currency IDR at 'B'; --Long-Term Local Currency IDR at 'BBB-'; Outlook Stable; --Short-Term Local Currency IDR at 'F3'; --Viability Rating at 'bb'; --Support at '3'; --National scale long-term rating at 'AAA(gtm)' ; --National scale short-term rating at 'F1+(gtm)'. Agromercantil Senior Trust --Long-term foreign currency loan participation notes at 'BB+'. Mercom Bank Limited --National scale long-term rating at 'AAA(gtm)'; --National scale short-term rating at 'F1+(gtm)'. Contact: Primary Analyst Ricardo Aguilar Director +52 81 8399-9124 Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes 2612 64920 Monterrey, Mexico Secondary Analyst Mario Hernandez Associate Director +503 2516-6614 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 National Scale Ratings Criteria (pub. 07 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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