Fitch Takes Actions on BBVA's Latin American Subsidiaries

NEW YORK & MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has taken actions on BBVA's subsidiaries in Latin American, following the downgrade of Banco Bilbao Vizcaya Argentaria's (BBVA) Issuer default ratings (IDR) and Viability Rating (VR) on Feb. 13, 2012 (see below). The rating actions differ across subsidiaries and countries. A complete detail of the rating actions for each individual subsidiary is included at the end of this release.

Fitch believes Latin America remains strategically important to BBVA. Indeed, BBVA's ability to successfully diversify its business away from Spain over the years is viewed as a strength for the group.

The drivers for the IDRs of BBVA's Latin American subsidiaries differ. The majority are driven by support from BBVA; in some cases, IDRs are driven by the intrinsic financial strength of the subsidiaries, as measured by their VRs. Should the IDRs of BBVA deteriorate further, it may be that an increasing number of IDRs of BBVA's Latin American subsidiaries may be driven by their VRs, provided these remain at current levels or are upgraded over time.

Country ceilings also play a role and some support-driven IDRs may be constrained.

Broadly speaking, those subsidiaries' IDRs which are support-driven have been downgraded and remain on Negative Outlook, reflecting the weakening of BBVA's ability to provide support. In turn, the subsidiaries with IDRs driven by VRs, have been affirmed since these do not incorporate any potential support from BBVA. Most national Ratings assigned to BBVA's Latin American subsidiaries have been affirmed as the relative strength of the issuer or the support of its parent allows the national scale ratings to remain at their current levels, with the exception of the Chilean subsidiaries that were downgraded one notch.

Some hybrid issues have been also downgraded in line with the recent revision of Fitch's criteria for these securities.

On Feb. 13, 2012, Fitch downgraded BBVA's Long-term Foreign Currency IDR to 'A' from 'A+', maintaining the Negative Outlook. This followed a two-notch downgrade of Spain's sovereign rating. The downgrade of BBVA's IDRs reflects the deterioration of the operating environment in Spain (see 'Fitch Downgrades BBVA, Bankia and Caixabank following Sovereign Action', dated 13 February 2012, for further details on BBVA and the rationale behind its downgrade).

The exposure of BBVA's subsidiaries in Latin America to their parent is negligible and tightly controlled by stringent local regulations, while these banks benefit from a historically large, stable, and well-diversified deposit base. Fitch believes that BBVA's Latin American subsidiaries' funding and capital positions are to a large degree ring-fenced from the rest of the group, due to strong regulatory oversight by their local regulators. In addition, some of these banks have strong competitive positions and have generally displayed a sound performance through the crisis.

The downgrade of BBVA Bancomer's hybrids and Banco Continental's issues, issued through a Cayman-based special purpose vehicle, reflects the confluence of two factors: the application of Fitch's new bank regulatory capital securities rating criteria (see 'Rating Bank Regulatory Capital and Similar Securities' dated Dec. 15, 2011 at www.fitchratings.com), and the fact that the anchor rating from where these securities are notched (the Local Currency Long-term IDRs of the respective banks) have been downgraded following a similar action at the parent company.

Accordingly, Fitch has taken the following rating actions:

Mexican Subsidiaries

BBVA Bancomer:
Fitch downgraded BBVA Bancomer's Local Currency Long-term IDR to 'A-' from 'A', since this was previously driven by potential support of BBVA. BBVA Bancomer's VR, affirmed at 'a-', is now the driver of its IDRs. The VR reflects BBVA Bancomer's strong franchise, risk and revenue diversification, resilient earnings throughout different phases of the business cycle, ample and stable customer deposits, as well as its reasonable asset quality metrics. It also considers lower than peers core capital levels and a slightly higher loans to deposits ratio.

As long as BBVA Bancomer's VR remains at its current level, the Outlook for the bank's Long-term IDRs should remain Stable as they do not incorporate any support from the parent. National Ratings are affirmed.

BBVA Bancomer's global junior subordinated securities were downgraded to 'BBB-' from 'BBB+', while the plain-vanilla subordinated hybrids were downgraded to 'BBB' from 'BBB+'. National Ratings assigned to the bank's hybrid securities, all of them being junior subordinated debt instruments, were downgraded to 'AA(mex)' from 'AAA(mex)'. All the issue ratings were removed from negative watch.

Casa de Bolsa BBVA Bancomer:
The National Ratings of Casa de Bolsa BBVA Bancomer in Mexico were affirmed. Fitch believes this securities broker is an integral and important part of BBVA Bancomer's franchsie in mexico and the agency does not differentiate between the credit risk of the two entities.

Facileasing, S.A. de C.V.:
The National Ratings of Facileasing in Mexico were affirmed. Facileasing is owned by BBVA. Nevertheless, Fitch believes that this entity is a strategic part of BBVA Bancomer and believes it should be viewed as part of BBVA's overall Mexican franchise. Its National Ratings are equalized with those of BBVA Bancomer.

Peruvian Subsidiaries
BBVA Continental (BC):
Fitch downgraded BC's Local Currency Long-term IDR to 'A-' from 'A', the rating outlook remains 'Negative' in line with that assigned to its parent. Should BBVA's Long-term IDR be downgraded, BC's Local Currency Long-term IDR would be downgraded, generally maintaining the current one-notch difference. However, the downside potential is limited because its Viability rating, currently at 'bbb+', prevents the Long-term IDRs from falling below a 'BBB+', provided no deterioration in the VR occurs. All other BC ratings were affirmed without any changes.

BC's IDRs reflect the support it would receive from its 46% stakeholder (BBVA). The foreign currency Long-term IDR is constrained by Peru's Country ceiling of 'BBB'. BC's VR reflects its strong franchise, solid performance, good profitability, high efficiency, good asset quality, ample reserves, stable and low cost deposit base and improved capital.

Continental Trustees (Cayman) Ltd (CTCL):
Fitch downgraded the loan participation notes issued by CTCL to 'BBB-' from 'BBB+'. The notes are secured by the rights to a junior subordinated loan extended to BC. The notes were downgraded two notches due to the combined effect of the application of Fitch's new bank regulatory capital securities rating criteria and the downgrade of its anchor rating (BC's Local Currency Long Term IDR). This criteria, requires that this type of securities be notched 1-2 notches from the anchor rating indicated above for probability of non-performance, in addition to 1-2 notches for loss severity.

Continental Senior Trustees (Cayman) Ltd (CSTC):
Fitch affirmed the rating of the loan participation notes issued by CSTC. The notes are secured by the rights to a senior loan extended to BC, hence are equalized with the Long-term Foreign Currency IDR of BC.

Continental Senior Trustees (Cayman) II Ltd (CSTCII):
Fitch affirmed the rating of the loan participation notes issued by CSTCII. The notes are secured by the rights to a senior loan extended to BC, hence are equalized with the Long-term Foreign Currency IDR of BC.

Colombian Subsidiaries
BBVA Colombia:
Fitch has revised the rating outlook on BBVA Colombia's Local Currency IDR to 'Negative' from 'Stable' in line with that assigned to its parent. Should BBVA's Long-term IDR be downgraded, BBVA Colombia's Local Currency IDR would be downgraded, generally maintaining the current one-notch difference. All other BBVA Colombia's ratings were affirmed.

BBVA Colombia's IDRs are driven by support from BBVA. The VR considers its resilient margins, improving profitability and asset quality, adequate reserves, low loan concentration, and relative efficiency, as well as its lower than average capital. BBVA Colombia's Long-term Foreign Currency IDR is constrained by Colombia's country ceiling of 'BBB'.

Chilean Subsidiaries
BBVA Chile and Forum:
The downgrade of both BBVA Chile's and Forum's long-term national-scale ratings is the result of the lower support capacity of its parent. These subsidiaries remain strategic for BBVA's franchise in Chile and are recurring, albeit smaller, contributors to the parent's overall profitability. The Outlook for the Long-term national ratings remains Negative, in line with that assigned to the Outlook for BBVA's Long-term IDR, signaling that further downgrades on BBVA may affect the National Ratings of its subsidiaries in Chile.

Panamanian Subsidiaries
BBVA Panama:
BBVA Panama's National Ratings were affirmed and are driven by support from BBVA. The Rating Outlook remains Stable. Despite the recent downgrade of BBVA's ratings, the relative strength of the support of its parent allows the national scale ratings to remain at their high level. Only a multi-notch downgrade of BBVA's Long-term IDR would result in a downgrade of BBVA Panama's National Ratings.

Regardless of its smaller size compared to other BBVA subsidiaries in the region, BBVA Panama is considered to be strategic for BBVA's Latin American franchise as denotes by the long track record of this operation in Panama.

The rating actions are as follows:

BBVA Bancomer
--Foreign currency Long-term Issuer Default Rating (IDR) affirmed at 'A-'; Outlook Stable
--Local currency Long-term Issuer Default Rating (IDR) downgraded to 'A-' from 'A'; Outlook Stable, Rating Watch Negative Removed
--Foreign and local currency short-term IDRs affirmed at 'F1'
--Viability Rating affirmed at 'a-';
--Support rating affirmed at '1';
--Long-term national rating affirmed at 'AAA(mex)'; Stable Outlook
--Short-term national rating affirmed at 'F1+(mex)';
--Long-term senior unsecured global notes affirmed at 'A-';
--Long-term plain vanilla subordinated notes downgraded to 'BBB' from 'BBB+'; Rating Watch Negative Removed
--Long-term junior subordinated notes downgraded to 'BBB-' from 'BBB+'; Rating Watch Negative Removed
--Long-term national-scale rating for local senior unsecured debt issues affirmed at 'AAA(mex)';
--Long-term national-scale rating for local issues of market linked securities affirmed at 'AAA(emr)(mex)'.
--Long-term national-scale rating for local subordinated debt issues downgraded to 'AA(mex)' from 'AAA(mex)'; Rating Watch Negative Removed

Casa de Bolsa BBVA Bancomer
--Long-term national rating affirmed at 'AAA(mex)'; Stable Outlook
--Short-term national rating affirmed at 'F1+(mex)'.

Facileasing, S.A. de C.V.
--Long-term national rating affirmed at 'AAA(mex)'; Stable Outlook
--Short-term national rating affirmed at 'F1+(mex)';
--Short-term senior unsecured debt affirmed at 'F1+(mex)'.

BBVA Continental
--Long-term foreign currency IDR affirmed at 'BBB+' (constrained by Peru's country ceiling); Rating Outlook Stable
--Long-term local currency IDR downgraded to 'A-' from 'A'; Rating Outlook Negative
--Short-term foreign currency IDR affirmed at 'F2';
--Short-term local currency IDR affirmed at 'F1';
--Support rating affirmed at '2'.
--Viability rating affirmed at 'bbb+'

Continental Trustees (Cayman) Ltd.
-- Senior secured junior subordinated loan participation notes downgraded to 'BBB-' from 'BBB+'; Rating Watch Negative Removed

Continental Senior Trustees (Cayman) Ltd
-- Senior secured loan participation notes affirmed at 'BBB+';

Continental Senior Trustees II (Cayman) Ltd.
-- Senior secured loan participation notes affirmed at 'BBB+';

BBVA Colombia
--Long-term foreign currency IDR: affirmed at 'BBB' (constrained by Colombia's country ceiling); Outlook Stable
--Short-term foreign currency IDR affirmed at 'F2'
-- Long-term Local currency IDR affirmed at 'A-'; Rating Outlook revised to Negative from Stable;
-- Short-term Local currency IDR affirmed at 'F1'
--Viability Rating affirmed at 'bb+'
--Support rating affirmed at '2'
--National Long-term rating affirmed at 'AAA(col)'; Outlook Stable
--National senior unsecured debt affirmed at 'AAA(col)'
--National Short-term rating affirmed at 'F1+(col)'

BBVA Chile
--Long-term national-scale rating downgraded to 'AA+(cl)' from 'AAA(cl)'; Rating Outlook Negative;
--Short-term national-scale rating affirmed at 'N1+(cl)'.
--National long term rating of its senior unsecured bonds downgraded to 'AA+(cl)' from 'AAA(cl);
--National long term rating of its mortgage notes downgraded to 'AA+(cl)' from 'AAA(cl);
--National long term rating of its Subordinated bonds downgraded to 'AA-(cl) from 'AA(cl)';
--National equity rating affirmed at 'Primera Clase nivel 3'.

Forum Servicios Financieros
--Long-term national-scale rating downgraded to 'AA(cl)' from 'AA+(cl)'; Rating Outlook Negative;
--National long term rating of its senior unsecured bonds downgraded to 'AA(cl)' from 'AA+(cl);
--National short term rating of its commercial paper affirmed at 'F1+(cl)';

BBVA Panama
--Long-term national-scale rating affirmed at 'AAA(pan)'; Outlook Stable
--Short-term national-scale rating affirmed at 'F1+(pan)'
--Long-term Senior unsecured debt affirmed at 'AAA(pan)'

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);
--'Rating Bank Regulatory Capital and Similar Securities' ( Dec. 15, 2011);
--'National Ratings Criteria' (Jan. 19, 2011).
--'Treatment of Hybrids in Bank Capital Analysis' (Jul. 11, 2011).

Applicable Criteria and Related Research:
Treatment of Hybrids in Bank Capital Analysis
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=641269
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Rating Bank Regulatory Capital and Similar Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656371
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

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