NEW YORK--(BUSINESS WIRE)--Fitch Ratings has today affirmed the ratings of the Latin America subsidiaries of Banco Bilbao Vizcaya Argentaria (BBVA), following the May 23 affirmation of BBVA's Issuer Default Ratings (IDRs) and Viability Rating (VR) (see 'Fitch Affirms Santander's, BBVA's and CaixaBank's Ratings', dated May 23 2013, available at www.fitchratings.com). A complete list of rating actions for each subsidiary is included at the end of this press release.
In Fitch's opinion, Latin America remains core to BBVA's global business as its key subsidiaries in the region (Chile, Colombia, Mexico, Panama and Peru) have generally maintained strong balance sheets and robust performances through the crisis and contributed on average about 25% of BBVA's profits since 2010. The parent benefits from the geographic diversification of its Latin American subsidiaries, which give BBVA the capacity to generate earnings internationally and make up for the muted results in Spain.
BBVA's subsidiaries in Latin America are self-funded and have generally boosted liquidity, maintained adequate capital and bolstered their contingent liquidity plans to cope with an eventual contagion from their parent's woes that would affect their access to funding. On the other hand, local regulators have ring-fenced these subsidiaries and proactively monitor their operations (liquidity, intercompany loans, dividend payouts) so as to minimize the probability of a contagion.
In the case of BBVA Bancomer S.A. and BBVA Banco Continental, their intrinsic strength warrants a stronger credit profile than that of their parent; hence, their ratings are driven by each bank's VRs. Accordingly, since the last rating review, and considering the systemic importance of some of these entities, Fitch has assigned government based support ratings and support rating floors to BBVA's subsidiaries in Mexico and Peru.
BBVA Chile's ratings do not consider any support from its parent but reflect Fitch's opinion that the bank could receive support from the Chilean government, if needed.
Finally, the ratings of BBVA's Colombian and Panamanian subsidiaries reflect the support they would receive from their parent, BBVA, rated 'BBB+', RON by Fitch.
These are the details of the rating actions and the rationale behind them:
KEY RATING DRIVERS
BBVA BANCOMER S.A.
BBVA Bancomer S.A.'s Viability Rating (VR) was affirmed at 'a-'. Despite being considered by Fitch a 'core' subsidiary of BBVA, the bank's VR does not factor in any extraordinary support from its parent and reflects its solid franchise and competitive position together with its overall sound and consistent financial performance, its strong margins, and robust funding and liquidity, given its leading systemic position. The ratings also factor in the bank's reasonable loss absorption capacity in the form of loan loss reserves and capital position, which stand at acceptable levels.
Long-and-Short term IDRs were affirmed at 'A-' and 'F1', respectively. These ratings are driven by BBVA Bancomer S.A.'s VR. National Scale Long-and-Short term Ratings were also affirmed at 'AAA(mex)' and 'F1+(mex)', respectively. BBVA Bancomer S.A.'s Support Rating was affirmed at '2'. Its Support Rating Floor (SRF) reflects Fitch's opinion that given its systemic importance as the largest bank in its country, the Mexican Government (FC and LC IDR's of 'BBB+' and 'A-' respectively, Stable Outlook) would most likely support BBVA Bancomer S.A. if required; therefore, the bank's SRF was affirmed at 'BBB-'.
BBVA Bancomer S.A.'s global junior subordinated securities were downgraded to 'BB+' from 'BBB-', while the plain-vanilla subordinated hybrids were downgraded to 'BBB-' from 'BBB'; four and three notches below its Long-term IDRs which are driven by its VR. The downgrades of these hybrid securities reflect Fitch's opinion that the bank's VR has consolidated as the key driver for its ratings - and the rating anchor for notching hybrid securities following Fitch's criteria. Hence, as support from its parent - which was expected to be forthcoming, regardless of the rank of BBVA Bancomer S.A.'s obligations - is no longer factored in the ratings, it cannot mitigate the higher risk of non-performance inherent to these securities.
According to Fitch's criteria to rate bank capital securities, this type of securities are notched 1-2 notches from the anchor rating indicated above for probability of non-performance, in addition to 1-2 notches for loss severity. By the same token, National Ratings assigned to the bank's hybrid securities, all of them being junior subordinated debt instruments, were downgraded to 'AA-(mex)' from 'AA(mex)'.
The revision of the Outlook of BBVA Bancomer S.A. to Stable from Negative is mostly driven by Fitch's perception that these ratings would not necessarily be affected by a moderate (one or two notches) potential downgrade of the parent's viability rating (VR), currently at 'bbb+'.
Casa de Bolsa BBVA Bancomer S.A. de C.V. and Facileasing S.A. de C.V.
The national Long-and-Short-term scale ratings of Casa de Bolsa BBVA Bancomer S.A. de C.V. (CBBB) and Facileasing S.A. de C.V. (Facileasing) were affirmed at 'AAA(mex)' and 'F1+(mex)' in each case. The latter are subsidiaries of Grupo Financiero BBVA Bancomer (GFBB)'s, whose ratings are associated to its main banking subsidiary (BBVA Bancomer S.A.). Therefore, these ratings reflect the legal obligation of GFBB to support its subsidiaries, as well as their core role to the Group.
BBVA CHILE
BBVA Chile remains a strategically important subsidiary of BBVA. BBVA Chile's national ratings were affirmed at 'AA-(cl)' and 'N1+(cl)' and do not factor in any support from its parent; the ratings reflect Fitch's belief, that the bank would receive support from the Government, should it be needed. Accordingly, BBVA Chile's ratings bear a stable rating outlook in line with that of Chile (rated 'A+'/'AA-', ROS by Fitch) which boasts a long track record of economic stability and adequate regulation.
BBVA Chile's senior unsecured bond ratings are equalized to the bank's national rating while the ratings of the bank's subordinated bonds are two notches below the bank's rating, reflecting the higher potential loss in case of default due to their subordinated nature.
FORUM SERVICIOS FINANCIEROS S.A. (Forum)
Forum remains strategic to BBVA's franchise in Chile and is a recurring, albeit small, contributor to the parent's overall profitability. Forum's national rating was affirmed at 'AA-(cl)' and reflects the support Forum would receive from its parent, should it be required.
The current Outlook for the Long-term national ratings for Forum remains Negative, in line with the outlook of BBVA's Long-term IDR.
The ratings of Forum's commercial paper issues are at the same level of the entity's national rating.
BBVA BANCO CONTINENTAL
BBVA Banco Continental's foreign and local currency IDRs were affirmed at 'BBB+' and are driven by the banks VR ('bbb+') which was also affirmed. The VR reflects BBVA Banco Continental's robust franchise, solid performance, good profitability, high efficiency, good asset quality, ample reserves, wide and low cost deposit base, and adequate capital. Fitch's view of BBVA Banco Continental's creditworthiness is tempered by its tough competitive environment.
BBVA Banco Continental's support and support floor rating (affirmed at '2' and 'BBB-' respectively) reflect the bank's systemic importance as Peru's second largest bank with a market share of about 22% by assets. In Fitch's opinion support from Peru ('BBB'/'BBB+') would be forthcoming should it be needed.
The revision of the Outlook of BBVA Banco Continental to Stable from Negative is mostly driven by Fitch's perception that these ratings would not necessarily be affected by a moderate (one or two notches) potential downgrade of the parent?s viability rating (VR), currently at 'bbb+'.
CONTINENTAL TRUSTEES (CAYMAN) LTD (CTCL)
Fitch has downgraded the rating of the loan participation notes issued by CTCL to 'BB' from 'BB+'. The notes are secured by the rights to a junior subordinated loan extended to BBVA Continental. The notes are notched four notches from their anchor rating (BBVA Continental's Local Currency long-term IDR, driven by its VR).
The downgrade reflect Fitch's opinion that the bank's VR has consolidated as the key driver for its ratings - and the rating anchor for notching hybrid securities following Fitch's criteria. Hence, as support from its parent - which was expected to be forthcoming, regardless of the rank of BC's obligations - is no longer factored in the ratings, it cannot mitigate the higher risk of non-performance inherent to these securities.
According to Fitch's criteria to rate bank capital securities, this type of securities are 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 has affirmed the rating of the loan participation notes issued by CSTC at 'BBB+'. The notes are secured by the rights to a senior loan extended to BBVA Continental, hence are equalized with the long-term Foreign Currency IDR of BBVA Continental.
CONTINENTAL SENIOR TRUSTEES (CAYMAN) II LTD (CSTCII)
Fitch has affirmed the rating of the loan participation notes issued by CSTCII at 'BBB+'. The notes are secured by the rights to a senior loan extended to BBVA Continental, hence are equalized with the long-term Foreign Currency IDR of Banco Continental.
BBVA COLOMBIA S.A.
BBVA Colombia S.A.'s Support rating, IDRs and national ratings were affirmed at '2', 'BBB' and 'AAA(col)' respectively and reflect the support it would receive from its parent, BBVA, given its growing strategic importance which is the result of its steady performance, high growth potential and growing contribution to BBVA's bottom line.
BBVA Colombia S.A.'s VR (affirmed at 'bbb-') is driven by the bank's sound asset quality and sustained profitability as well as its improved capital/ reserve cushions, which were generally in line with similarly rated entities. Moreover, BBVA Colombia S.A.'s positive operating environment and strengthened risk management processes give an additional level of comfort as to the sustainability of these indicators.
BBVA Colombia S.A.'s IDRs bear a Negative Outlook in line with that of its parent. This reflects the fact that, should the credit standing of its parent deteriorate, contagion risk to BBVA Colombia S.A. cannot be ruled out.
The revision of the Outlook of BBVA Colombia S.A.'s national ratings to Stable from Negative is mostly driven by Fitch's perception that these ratings would not necessarily be affected by a moderate (one or two notches) potential downgrade of the parent?s viability rating (VR), currently at 'bbb+'.
BBVA Colombia S.A.'s senior unsecured bond ratings are aligned with those of the supported national rating. The subordinated bond rating is rated at the same level as Fitch believes that support from BBVA, if needed, would be forthcoming regardless of the rank of the debt.
BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A.
Banco Bilbao Vizcaya Argentaria (Panama), S.A.'s National Ratings were affirmed at 'AA+(pan)' and 'F1+(pan)'. The ratings reflect the potential support from its parent, should it be required. In spite of its small size compared to other BBVA subsidiaries in the region, Banco Bilbao Vizcaya Argentaria (Panama), S.A. has a long track record of operations in Panama and is considered to be strategically important for BBVA's Latin American franchise.
The Rating Outlook remains Negative; in line with the Outlook of its parent.
The ratings of the senior unsecured bonds issued by Banco Bilbao Vizcaya Argentaria (Panama), S.A. are at the same level of the issuer's national rating.
RATING SENSITIVITIES
BBVA BANCOMER S.A.
BBVA Bancomer S.A.'s ratings could benefit from a sustained improvement in its asset quality metrics to a level closer to that of its peers, as well as the maintenance of its performance and structural strengths.
BBVA Bancomer S.A.'s VR and IDRs could be negatively affected by a deterioration of the bank's capital position and asset quality metrics, such as a FCC below 8% and a NPL above 5%.
BBVA Bancomer S.A.'s subordinated debt ratings will likely mirror any change in its IDRs, as these are expected to maintain the same relativity to the bank's credit rating.
A potential upgrade or downgrade of GFBB's non-banking subsidiaries (CBBB and Facileasing, S.A. de C.V.) will be driven by any potential changes on BBVA Bancomer S.A.'s ratings, or changes in the legal framework that could alter the propensity of GFBB to support them, scenario that seems unlikely at present.
BBVA CHILE
BBVA Chile's ratings could be benefited by an upgrade of the parent bank or a significant improvement of its revenue and asset diversification, its performance, efficiency, as well as its capital base. On the other hand, BBVA Chile's ratings could come under pressure if Chile's willingness to support the bank diminishes. The bonds' ratings would move in line with the bank's national rating.
FORUM SERVICIOS FINANCIEROS S.A.(Forum)
Forum's ratings would generally move in line with those of its parent. In particular, further downgrades of BBVA's ratings may affect the National Ratings of Forum. Fitch does not expect government support to be extended to non-bank financial intuitions. The ratings of the commercial paper issued by forum would move in line with the rating of the issuer.
BBVA BANCO CONTINENTAL
Should BBVA Banco Continental sustain its balance sheet strength and performance (in spite of the expected deterioration of some ratios), the latter's VR and LC IDR could be upgraded and its FC IDR would be constrained by Peru's country ceiling.
Though not Fitch's base case, BBVA Banco Contiental's VR and IDRs would be pressured by a sharp deterioration of BBVA Banco Continental's performance or a larger than expected decline in asset quality that would erode the capital/ reserves cushion.
BBVA Banco Continental's Support Rating (SR) and Support Rating Floor would be affected if, in Fitch's view, the Peruvian government's willingness or ability to support the bank change.
Continental Trustees (Cayman) Ltd, Continental Senior Trustees (Cayman) Ltd and Continental Senior Trustees (Cayman) II Ltd:
The ratings of the securities issued by these three SPVs would move in line with those of its parent.
BBVA COLOMBIA S.A.
BBVA Colombia S.A.'s ratings could be downgraded if its parent's IDR is downgraded, generally maintaining the current one-notch difference. Downward risk for BBVA Colombia S.A.'s IDRs is limited by its intrinsic creditworthiness, as reflected in its VR.
BBVA Colombia S.A.'s VR could be pressured by severe asset quality deterioration or a dismal performance that would erode its capital and reserve cushion. BBVA Colombia S.A.'s national ratings would be affected by the same reasons and, if its parent's ability to support the bank deteriorates sharply.
BBVA Colombia S.A.'s bond ratings would move in line with the entity's ratings and a possible notching for the subordinated bonds would be considered if BBVA's ratings deteriorate and BBVA Colombia S.A.'s national ratings become driven by the bank's intrinsic strength.
BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A.
Banco Bilbao Vizcaya Argentaria (Panama), S.A.'s ratings and the ratings of its bond issues would move in line with the ratings of its parent.
Fitch has taken the following rating actions:
BBVA BANCOMER S.A.
--Long-term foreign and local currency IDRs affirmed at 'A-', Rating Outlook revised to Stable from Negative;
--Short-term foreign and local currency IDRs affirmed at 'F1';
--Viability Rating affirmed at 'a-';
--Support Rating affirmed at '2';
--Support Rating Floor affirmed at 'BBB-';
--National-scale long-term rating affirmed at 'AAA(mex)'; Rating Outlook Stable
--National-scale short-term 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' ;
--Long-term junior subordinated notes downgraded to 'BB+' from 'BBB-';
--National-scale long-term rating for local senior unsecured debt issues affirmed at 'AAA(mex)';
--National-scale long-term rating for local issues of market linked securities affirmed at 'AAA(emr)(mex)';
--National-scale long-term rating for local subordinated debt issues downgraded to 'AA-(mex)' from 'AA(mex)'.
Casa de Bolsa BBVA Bancomer S. A. de C.V.:
--National-scale long-term rating affirmed at 'AAA(mex)', Rating Outlook Stable;
--National-scale short-term rating affirmed at 'F1+(mex)'.
Facileasing, S.A. de C.V.:
--National-scale long-term rating affirmed at 'AAA(mex)', Rating Outlook Stable;
--National-scale short-term rating affirmed at 'F1+(mex)';
--National-scale long-term rating for local senior unsecured debt issues affirmed at 'AAA(mex)';
--Short-term senior unsecured debt affirmed at 'F1+(mex)'.
BBVA CHILE
--Long-term national-scale rating affirmed at 'AA-(cl)''; Rating Outlook Stable;
--Short-term national-scale affirmed at 'N1+(cl)';
--National long term rating of its senior unsecured bonds affirmed at 'AA-(cl)';
--National long term rating of its mortgage notes affirmed at 'AA-(cl)';
--National long term rating of its Subordinated bonds affirmed at 'A (cl)';
--National equity rating affirmed at 'Primera clase nivel 3'.
FORUM SERVICIOS FINANCIEROS S.A.
--Long-term national-scale rating affirmed at 'AA-(cl)'; Rating Outlook Negative;
--National long term rating of its senior unsecured bonds affirmed at 'AA-(cl)';
--National long term rating of its commercial paper affirmed at 'AA-(cl)'
--National short term rating of its commercial paper affirmed at 'F1+(cl)';
BBVA BANCO CONTINENTAL
--Long-term foreign and local currency IDRs affirmed at 'BBB+', Rating Outlook Revised to Stable from Negative;
--Short-term foreign and local currency IDRs affirmed at 'F2';
--Viability rating affirmed at 'bbb+'.
--Support rating affirmed at '2';
--Support Rating Floor affirmed at 'BBB-';
--Senior Unsecured Debt affirmed at 'BBB+'
Continental Trustees (Cayman) Ltd.
--Senior secured junior subordinated loan participation notes downgraded to 'BB' from 'BB+'.
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 S.A.
--Long-term foreign and local currency IDRs affirmed at 'BBB'; Rating Outlook Negative;
--Short-term foreign and local currency IDRs affirmed at 'F2';
--Viability rating affirmed at 'bbb-';
--Support rating affirmed at '2';
--National long-term rating affirmed at 'AAA(col)'; Rating Outlook Revised to Stable from Negative;
--National short-term rating affirmed at 'F1+(col)'.
--National senior unsecured debt affirmed at 'AAA(col)';
--National long-term subordinated debt affirmed at 'AAA(col)'.
BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A.
--Long-term national-scale rating affirmed at 'AA+(pan)', Rating Outlook Negative;
--Short-term national-scale rating affirmed at 'F1+(pan)';
--Long-term senior unsecured debt affirmed at 'AA+(pan)'.
Additional information is available at 'www.fitchratings.com'.
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);
--'Rating FI subsidiaries and Holding Companies' (Aug. 10, 2012).
--'Rating Financial Institutions Above the Local Currency Sovereign Rating' (Dec. 20, 2011).
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
Rating FI Subsidiaries and Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209
Rating Financial Institutions Above the Sovereign
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696373
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=792263
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