BUENOS AIRES, Argentina & SANTIAGO, Chile--(BUSINESS WIRE)--Fitch Ratings has placed the following ratings for Corpbanca on Rating Watch Negative:
--Foreign and local currency Long-term Issuer Default Rating (IDR) of 'BBB+';
--Viability Rating of 'bbb+';
--Individual Rating of 'C';
--USD200 million bonds programme foreign currency long-term rating at 'BBB+'.
In addition, Fitch has placed on Rating Watch Negative the ratings of Corp Group Interhold S.A.'s Long-term IDR of 'BBB-' and National Long-term Rating of 'A+(cl)', and the
'BBB-'/'A+(cl)' of its USD130 million senior unsecured notes. Corp Group Interhold S.A. is a holding company under which Corpbanca is held through other holding companies; its ratings are derived from those of its principal operating company, Corpbanca.
At the same time Fitch has affirmed the bank's other ratings as listed at the end of this release.
The rating action follows the bank's announcement of its agreement to acquire a 95% stake of Banco Santander Colombia (BSC). While Fitch considers this transaction to be positive for Corpbanca from a business point of view as it is entering a market with higher growth potential than Chile, it will be challenging due to the tough competition in Colombia and, in Fitch's opinion, will place Corpbanca's capitalization under pressure while its capacity to regenerate capital from earnings and after dividend payments will be challenging. On completion of the acquisition under the announced conditions, Fitch will downgrade Corpbanca's above mentioned ratings.
Corpbanca will pay USD1.15 billion for the acquisition, which will be funded with its own resources and a capital increase of USD450 million, in addition to the recent USD370 million of fresh capital received in 3Q2011. BSC has total assets of roughly USD4 billion and equity of USD398 million. After deducting the goodwill of around USD722 million, Fitch calculates that Corpbanca's Fitch Core capital ratio will decline to around 6.45% from 10.03% at
Sep. 30, 2011, which is also significantly lower than its historic level before the recent capital increase. These levels of capitalization compare poorly against similarly rated banks regionally and internationally, especially in the context of the bank's aggressive growth strategy in Chile and considering that the profitability of BSC is similar to that of Corpbanca (ROA of 1.7% at Sep. 30, 2011 and 1.6% respectively. While under Fitch's methodology the main indicator of a bank's capitalization is the Fitch Core Capital ratio, Fitch recognizes that Corpbanca's Fitch Eligible Capital ratio of around 10.7% after the acquisition (14.33% at Sep. 30, 2011) will be closer to that of similarly rated banks given the equity credit Fitch gives to the subordinated debt issued in Chile.
The transaction is subject to regulatory approvals in Chile and Colombia and is expected to close in the first half of 2012. The stake to be purchased by Corpbanca is the maximum stake allowed to an individual shareholder by Colombian regulations. Corpbanca's shareholders will purchase at least an additional 2.85% stake. The acquisition also includes Santander Investment Securities Colombia SA (stock brokerage), Santander Insurance Agency Ltd (insurance) and Santander Colombia SA Investment Trust (trustee).
The ratings assigned to Corp Group Interhold are supported by an adequate expected dividend flow from the company's largest operating subsidiaries, especially those from Corpbanca. Interhold's expected cash flow is also enhanced by the recurrent dividend stream from its insurance subsidiaries. The Rating Watch Negative reflects the weakening of the ratings of Interhold's principal subsidiary. Fitch does not expect additional increases in the financial debt of the holding company or other mezzanine holdings without the proper increase in the expected revenue and capital ratios. Interhold's total financial debt is considered adequate, with a double leverage ratio of 113.4% as of June 30, 2011. According to the entity's projections, the transaction impact over this ratio would be neutral and in Fitch's opinion, a material increase of this ratio will probably place downward pressure on Interhold's ratings.
Corpbanca is Chile's fourth largest private sector bank that operates in almost all market segments. At Oct. 31, 2011 it had 7.5% of the Chilean financial system's loans and 7.2% in deposits. It is 51.23% owned by Corp Group Banking S.A. (CGB), 9.22% by Cia. Inmobiliaria y de Inversiones SAGA (entity controlled by Alvaro Saieh Bendeck and his family), and the balance is widely held by domestic and foreign institutional investors. In turn, CGB is controlled by a group of Chilean businessmen, in which the main individual shareholder is Alvaro Saieh, who together with his family indirectly control a 75.64% of Corpbanca.
Fitch has affirmed Corpbanca's following ratings:
--Foreign and local currency Short-term IDR at 'F2'; Outlook Stable;
--Support Rating at '3';
--Support Rating Floor at 'BB-';
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 16, 2011).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
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