NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Banco de Costa Rica's (BCR) long-term Issuer Default Rating (IDR) at 'BB+', and Viability Rating (VR) at 'bb+'. The Rating Outlook is Stable. A complete list of the rating actions follows this release.
KEY RATING DRIVERS
BCR's IDRs are driven by the explicit sovereign guarantees for all its liabilities, common to all Costa Rican state-owned banks. This explicit sovereign guarantee allows the bank's IDRs to be aligned with Costa Rica's sovereign ratings. In turn, BCR's VR considers the bank's solid franchise, ample deposit base, sufficient capital generation and its challenged efficiency ratios.
The customer's perception of the sovereign guarantee, combined with BCR's extensive branch network and solid deposit base, place BCR as one of the strongest competitors in the Costa Rican banking system. At the same time, its subsidiaries allow BCR to further diversify its revenues and to extend its business outside of Costa Rica.
Profitability is below its peer, but capital generations remain sufficient to sustain asset growth and maintain adequate capital ratios. With the exception of compulsory contributions, all profits are retained. In Fitch's opinion, BCR's capital ratios will remain at their current levels in the foreseeable future, provided that no additional compulsory contributions are required from state owned banks, and that asset growth remains moderate.
Loan portfolio diversification has improved while keeping asset quality ratios under control and a moderate exposure to exchange rate risk generated by loans granted in USD to non-dollar earners. The non-performing loans to total loans ratio has been consistently below the 'bb+' median and in line with the domestic market average. Reserves coverage is limited compared to the 'bb+' median of 113% an unlikely to increase under the current regulatory guidelines.
WHAT COULD TRIGGER A RATING ACTION
Changes in the bank's IDRs are contingent on sovereign rating actions for Costa Rica (rated 'BB+', Stable Outlook by Fitch). Given BCR's current financial profile, the potential for an upgrade of the bank's VR over the medium term is limited. In turn, though not Fitch's base case scenario, an unexpected material deterioration in efficiency or asset quality that places the bank's capital ratios below its peer's median might trigger a downgrade in BCR's VR. However, the bank's IDRs would not be affected as long as Costa Rica's sovereign rating remains at its current levels.
CREDIT PROFILE
BCR is the second largest bank in Costa Rica, with a market share of 24% of total assets. BCR has grown toward a more diversified commercial bank profile by increasing its participation in consumer financing along with its traditional corporate orientation. The bank complements its services with five subsidiaries: four wholly owned subsidiaries in regulated non-credit activities in Costa Rica and a 51% participation in the Panamanian general licensed bank Banco Internacional de Costa Rica (BICSA, rated 'BB+' with Stable Outlook by Fitch).
Fitch has affirmed BCR's ratings as follows:
International ratings
--Long-term
IDR at 'BB+', Outlook Stable;
--Short-term IDR at 'B';
--Long-term
local currency IDR at 'BB+', Outlook Stable;
--Short-term local
currency IDR at 'B';
--Viability Rating at 'bb+';
--Support
Rating at '3';
--Support Rating Floor at 'BB+'.
National ratings:
--Long-term national rating at 'AA+(cri)',
Outlook Stable;
--Short-term national rating at 'F1+(cri)';
--Long-term
senior unsecured bonds at 'AA+(cri)';
--Commercial paper at
'F1+(cri)'.
Additional information is available on '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. 15, 2012);
--'National Ratings
Criteria' (Jan. 19, 2011).
--'Assessing and Rating Bank
Subordinated and Hybrid Securities' (Dec. 5, 2012).
Applicable Criteria and Related Research:
Global Financial
Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
National
Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Assessing
and Rating Bank Subordinated and Hybrid Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542
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