NEW YORK & BOGOTA, Colombia--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of Financiera de Desarrollo Territorial S.A. - FINDETER (FINDETER). The Rating Outlook is Positive for the entity's 'BBB' long-term Issuer Default Ratings (IDR). A full list of FINDETER's ratings follows at the end of this press release.
KEY RATING DRIVERS - IDR SUPPORT, SUPPORT FLOOR AND NATIONAL RATING
Fitch's assessment of the Colombian government's willingness and capacity to provide timely and sufficient support drives the ratings of FINDETER, which are aligned with those of the sovereign. Although the Colombian government does not explicitly guarantee all of FINDETER's liabilities, Fitch views the entity as an integral part of the state given its role in providing financing for infrastructure investment projects and economic development. FINDETER's National ratings reflect the lowest expectation of default risk compared to all other local issuers or obligations, explained by the extremely high probability of government support.
FINDETER has a clear mandate to provide financing for infrastructure investment and promote regional and urban development. FINDETER's strategic importance in Colombia's national development plan underpins Fitch's opinion of the government's willingness of support, while the sovereign's investment grade ratings underpin its capacity, resulting in a Support Rating of '2' and Support Floor of 'BBB-'.
Like other second-tier institutions, loan impairments are historically low, and are complemented by a high level of reserves. The loan portfolio is soundly diversified by economic sector and almost all of its debtors are regulated financial institutions. These factors mitigate the credit risks derived from its limited number of debtors and, like other second-tier institutions, a high loan concentration by obligor. Additionally, the institution has a legal status as a rediscount entity, which implies a preferred position in the collection of loans, relative to the rest of its clients' creditors.
FINDETER exhibits a stable but low financial performance in alignment with its public interest nature and development promotion role. The institution's target is to maintain profitability at a level higher than the reporting period's inflation to preserve the value of capital over time. As such, the institution maintains a low net interest margin that, despite good operating efficiency and low impairment charges, results in modest net income and low internal capital generation.
In light of its status as a second-tier bank and size within the local market, FINDETER has high funding and credit concentrations. The institution's 20 largest borrowers account for 96% of its credit portfolio while the 20 largest depositors account for about half of its deposits. FINDETER is progressively seeking new creditors and financing mechanisms; however, in Fitch's view funding concentration will remain high in the short term.
Historically, FINDETER's capitalization has been high. However, given low internal capital generation, the institution's equity has been pressured during periods of accelerated asset growth. In Fitch's opinion, the current level of capitalization is sufficient to support several years of growth, though the institution may require a capital injection over the long-term if it is to maintain double-digit asset growth rates. In light of the transformation of FINDETER's legal nature in 2011, future capital injections could potentially come from a source besides the Colombian state. However, in accordance with its statutes no other shareholder can exceed a 30% stake.
RATING SENSITIVITIES
In the foreseeable future, the IDRs of FINDETER will likely mirror any positive or negative rating action on the sovereign ratings. However, there is limited downside potential to the bank's ratings as the Outlook on Colombia's IDRs is Positive.
PROFILE
FINDETER is a nationwide special official institution related to the Ministry of Finance and Public Credit that focuses on economic development. The institution's main shareholder is the government of Colombia along with other public regional shareholders. The government created the institution in 1989 by Act 57, but its legal nature was transformed by Decree 4167 in November 2011, providing more flexibility in its internal organization and in the ownership structure.
Considering the aforementioned factors, Fitch has affirmed the following ratings:
--Long-term IDR at 'BBB-'; Outlook 'Positive';
--Short-term IDR at 'F3';
--Local Currency Long-term IDR at 'BBB'; Outlook Positive;
--Local Currency Short-term IDR at 'F3';
--Support Rating at '2';
--Support Floor at 'BBB-'.
Fitch affirmed the following national ratings on May 27, 2013:
--National Long-term rating at 'AAA(col)'; Outlook Stable;
--National Short-term rating at 'F1+(col)'.
For additional details on the national ratings, please see Fitch's May 27, 2013 press release, which is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Fitch Revises Colombia's Rating Outlook to Positive; Affirms 'BBB-' Foreign Currency IDR' (March 6, 2013);
--'Colombia Regulates Toward Basel III, Must Do More' (Sept. 4, 2012);
--'Efficiency in Andean Banks' (Sept. 13, 2012);
--'2013 Outlook: Andean Banks' (Dec. 13, 2012).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
Efficiency in Andean Banks
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688588
2013 Outlook: Andean Banks
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696215
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=792252
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