December 16, 2016 / 7:11 PM / in a year

Fitch Publishes Peer Review of Large Chilean Banks

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Peer Review: Large Chilean Banks (Stable Performance Despite Challenging Environment) here SANTIAGO, December 16 (Fitch) Fitch Ratings, Santiago, 16 December 2016: [Fitch Ratings has published a peer review of large Chilean banks covering the four key players in the system. Together they represent 64.9% of total loans as of June 30, 2016, excluding lending by foreign subsidiaries. Assets for the large Chilean banks are between USD55 billion and USD45 billion, and are primarily allocated to the domestic market. As part of its Nov. 7, 2016 peer review, Fitch had affirmed the National ratings for the following: Banco Santander Chile (SAN), Banco de Chile (BCH), Banco Estado (Banco Estado) and Banco Credito e Inversiones (BCI). In addition, Fitch has affirmed the Long-Term Issuer Default Ratings (IDRs) and Viability Ratings (VRs) for SAN, Banco Estado and BCI. The Rating Outlook for BCI's Long-term IDRs and National Rating remain Positive. On Dec. 15, 2016, Fitch revised the Rating Outlook on Banco Estado and BSC's Long-Term Foreign and Local Currency IDRs to Negative from Stable, as a consequence of the same action on Chile's sovereign rating announced on Dec. 13, 2016. Each of the entities' ratings considered their dominant competitive positions, stable operating environment and solid regulatory framework, as well as healthy risk appetite, asset quality and profitability. Chile's low economic growth, averaging 2% from 2014 to 2016, has translated into slower loan growth. Nevertheless, these banks have been resilient through various economic cycles and have a track record of consistent results. These large banks endured the Chilean economic slowdown and international volatility with more predictable and relatively stable profitability levels, adequate internal capital generation and higher portfolio quality than their regional peers. The large Chilean banks exhibit a solid risk management framework based on local regulatory standards and robust corporate governance practices, adequate provisioning and controlled impairment levels. Corporate portfolio concentrations reflect the small size and relatively concentrated nature of the local market, where these entities play a key role in the economy's funding chain. Fitch believes that the main Chilean banks exhibit solid liquidity and asset-liability management, adequate diversification of their funding sources, and a stable client deposit base. Their strong market shares reflect their robust franchises and the confidence they enjoy from their depositors, even during periods of stress in the financial markets. In addition, the deep local capital market gives Chilean banks access to significant amounts of long-term funding. In Fitch's opinion, the three largest private sector banks are adequately capitalized and will be able to meet the higher requirements as Basel III rules are adopted. Banco Estado will likely need a significant capital injection to meet the requirements once they become applicable. The banking system continues to be challenged to increase its core capital to support future growth in the face of lower profitability and likely higher requirements as Basel III rules are adopted. The replacement of Tier II complementary capital instruments that currently do not absorb losses before the point of non-viability will be a key issue and the local regulator still hasn't established the parameters for a possible improvement in complementary capital (additional tier I, or AT1). Contact: Primary Analysts Mark Narron (BSC, Banco Estado and BCI) Director +1-212-612-7898 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Abraham Martinez (BCH) Director +56-2-499-33-17 Latin America Financial Institutions Fitch Ratings Santiago, Chile Secondary Analysts Santiago Gallo (BSC, Banco Estado and BCH) Director +56-2-499-33-20 Abraham Martinez (BCI) Director +56-2-499-33-17 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available at ''. 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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