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Fitch Rates Caribbean Development Bank 'AA+'; Outlook Stable
March 9, 2017 / 7:56 PM / 9 months ago

Fitch Rates Caribbean Development Bank 'AA+'; Outlook Stable

(The following statement was released by the rating agency) LONDON, March 09 (Fitch) Fitch Ratings has assigned Caribbean Development Bank (CDB) a Long-Term Issuer Default Rating (IDR) of 'AA+' with a Stable Outlook and a Short-Term IDR of 'F1+'. KEY RATING DRIVERS The ratings and Stable Outlook reflect the following key rating drivers: The ratings of CDB are fully driven by its intrinsic credit quality, most notably its high level of solvency (assessed at aa) and its excellent liquidity (assessed at aaa). The 'medium-risk' business environment assessment (comprising a low-risk assessment of business profile and medium-risk assessment of the operating environment) adds a single notch to the solvency assessment of 'aa', resulting in an overall intrinsic rating of 'aa+'. The 'aa' solvency assessment of CDB is driven by 'excellent' capitalisation and a 'low' risk profile. Capitalisation is a key strength for the ratings. The equity-to-adjusted assets ratio of 56.6% at end-September 2016 (62% at end-2015) is assessed as 'excellent' in Fitch's supranational criteria - far above the 25% threshold for an assessment of 'excellent'. Fitch views CDB's risk profile as low-risk, chiefly owing to its 'very low' loan impairment rate (0.5%), 'very low' equity risk (no equity participations in the portfolio), 'very low' market risks and 'excellent' risk management policies. However, there are two key risks for CDB - concentration (the five largest exposures account for 60.1% of the total portfolio) and a weak average rating of loans (B-), although this is slightly offset by the 'excellent' quality of preferred creditor status (PCS) from which CDB benefits (as sovereign exposure accounts for 96% of the portfolio), notwithstanding one temporary breach of PCS that occurred in 2012. Fitch assesses CDB's liquidity as 'aaa' primarily due to the large amount of liquid assets relative to short-term debt, as well as the overall excellent quality of the institution's treasury portfolio. Based on the agency's projections, the bank's liquidity assessment will remain at 'aaa', as a consequence of the bank's conservative financial rules, which will continue to result in excellent coverage of short-term debt by liquid assets. CDB's business environment is viewed by Fitch as a rating strength and results in a one-notch uplift to the intrinsic rating. CDB's 'low-risk' business profile assessment is characterised by good governance, the low risk strategy of the bank and a low exposure to the non-sovereign sector. However, in Fitch's assessment, CDB operates in a 'medium-risk' environment, as characterised by the income per capita in the countries of operations, the political risk and business climate in the countries of operations and the operational support provided by member states, all of which sub-factors are assessed at 'medium-risk'. CDB's overall ratings do not benefit directly from extraordinary support. Fitch assesses the capacity of shareholders to support the bank as 'A+', in line with Fitch's forecast of the coverage of net debt by callable capital. Fitch believes that member states' propensity to support CDB is in line with fellow MDB peers. RATING SENSITIVITIES The Stable Outlook reflects Fitch's expectation that CDB's credit profile will remain commensurate with its 'AA+' rating. The following risk factors which, could individually or collectively, trigger a rating action are: - A material improvement in asset quality, concentration risk or the credit quality of the countries of operations would put upward pressure on the ratings; - The weakening of the solvency assessment, either as a result of weaker capitalisation metrics or an increase in the overall assessment of risks, would put downward pressure on the ratings. KEY ASSUMPTIONS The ratings and Outlook are sensitive to a number of assumptions: - No significant change in the composition of the portfolio of the bank; - No major deviation from the current strategy of CDB, in particular regarding lending growth; - Risk management policies will remain unchanged and no breach is expected. Contact: Primary Analyst Nicholas Perry Analyst +44 20 3530 1795 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Eric Paget-Blanc Senior Director +33 1 44 29 91 33 Committee Chairperson Tony Stringer Managing Director +44 20 3530 1219 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Sources of information - The source(s) of information used to assess these ratings were the Caribbean Development Bank's financial statements, and other information provided by the Caribbean Development Bank. Applicable Criteria Supranationals Rating Criteria (pub. 27 Jul 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020339 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 © 2016 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. 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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

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