NEW YORK & SAN SALVADOR, El Salvador--(BUSINESS WIRE)--Fitch Ratings has downgraded Banco Agricola S.A.'s (Agricola) ratings as follows:
--Viability Rating (VR) to 'bb+' from 'bbb-';
--Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-'.
The IDR's Outlook remains Negative.
In addition, Fitch has downgraded Banco Davivienda Salvadoreno S.A.'s (Davivienda) VR to 'bb-' from 'bb' and revised the bank's Rating Outlook to Negative from Stable.
These rating actions reflect the recent downgrade of El Salvador's Long-Term Ratings and Country Ceiling, and do not reflect changes in the banks' performance. A full list of Agricola's and Davivienda's ratings follows at the end of this press release.
AGRICOLA'S KEY RATING DRIVERS - IDRs, VR AND NATIONAL RATINGS
Agricola's IDRs and VR downgrades are a consequence of Fitch's downgrade of El Salvador's IDR to 'BB-' from 'BB' and Country Ceiling to 'BB+' from 'BBB-'. Agricola's IDRs are currently constrained by the Country Ceiling and, together with its VR, remains two notches above El Salvador's Sovereign Rating.
Agricola's above-sovereign VR reflects its strong local franchise, risk appetite and sound capitalization, which have proven to be key elements to perform well under stress circumstances. The agency believes that there is a close link between bank and sovereign credit risk (and therefore ratings) and it is exceptional for banks to be rated above their domestic sovereign.
Agricola's national ratings were affirmed as its relative strength in the local market remains unchanged. Inversiones Financieras Banco Agricola (IFBA)'s national ratings mirror Agricola's national ratings as the last represents around 99% of total assets and earnings.
Agricola's IDR is driven by its VR, which reflects its proven resilience to downturns in economic cycles and its dominant position in the local market. The bank's ratings also factor in El Salvador's challenging economic conditions, which may still have some impact on asset quality and growth prospects. It is important to point out that in the absence of a strong stand alone performance, Agricola's IDRs would remain at the same level given the support it would receive from its parent, Bancolombia (rated 'BBB' by Fitch), should it be required. This is reflected on Agricola's support rating of '3', indicating a moderate probability of support.
DAVIVIENDA'S KEY RATING DRIVERS - IDRs, VR AND NATIONAL RATINGS
Davivienda's Long-Term Rating Outlook has been revised to Negative from Stable, indicating that its IDR would be adjusted downwards if further downgrades of El Salvador's Sovereign Ratings result in a Country Ceiling adjustment. Davivienda's VR has been downgraded to 'bb-' from 'bb', aligned with the sovereign rating. The recent downgrade of El Salvador's sovereign rating denotes a more challenging operating environment and given that Davivienda has no track record of outperforming the market, its VR is constrained by the sovereign. Davivienda's national ratings were affirmed as well as those of its local holding Inversiones Financieras Davivienda, S.A. (IFDavivienda) as its relative strength in the local market remains unchanged.
Davivienda's IDR and National Ratings reflect the potential support it would receive from its holding company, the Colombian Banco Davivienda, S.A. (rated 'BBB-' with a Stable Outlook), should it be required. Fitch considers Davivienda, along with the parent's Central American subsidiaries, as Strategically Important (using Fitch's Criteria 'Rating FI Subsidiaries and Holding Companies') in fostering the group's expansion and diversification in Central America. Davivienda's support rating of '3' indicates a moderate probability of support from its parent.
Davivienda's VR is aligned with the sovereign rating. The rating reflects the bank's domestic franchise and market share, while also factoring in its slow asset growth, modest profitability and lower asset quality. Fitch believes that economic conditions have deteriorated in such way that they can affect the bank's performance.
AGRICOLA'S RATING SENSITIVITIES - IDRs, VR AND NATIONAL RATINGS
Agricola's Negative Outlook reflects that an eventual downgrade of El Salvador's sovereign rating could result in a downgrade of the country ceiling, which would, in turn, lead to a downgrade of Agricola's VR and IDR. On the other hand, if the sovereign ratings are eventually affirmed at 'BB-' and the Outlook is revised to Stable from Negative, it is highly likely that Agricola's IDR and Outlook would be revised accordingly. Agricola's national ratings would not be affected should El Salvador's sovereign and country ceiling be downgraded.
DAVIVIENDA'S RATING SENSITIVITIES - IDRs, VR AND NATIONAL RATINGS
Further downgrades in El Salvador's country ceiling will also result in a reduction in Davivienda's IDR and VR, as reflected by the bank's Negative Outlook. Changes in Davivienda's national and international IDRs could also respond to deviations in its parent capacity and/or propensity to support it.
Davivienda's VR has limited upside potential. The VR could be pressured downward by further changes in El Salvador?s sovereign ratings or by an unexpected material deterioration in its capital ratios and/or its franchise and competitive position.
Fitch has taken the following rating actions:
Banco Agricola S.A.:
--Long-term IDR downgraded to 'BB+' from 'BBB-'; Outlook Negative;
--VR downgraded to 'bb+' from 'bbb-';
--Short-term IDR downgraded to 'B' from 'F3';
--Support affirmed at '3';
--Long-term National Rating affirmed at 'AAA(slv)'; Outlook Stable;
--Short-term National Rating affirmed at 'F1+(slv)';
--Senior Unsecured Debt Long-term Rating affirmed at 'AAA(slv)';
--Senior Secured Debt Long-term Rating affirmed at 'AAA(slv)'.
Inversiones Financieras Banco Agricola S.A.
--Long-term National Rating affirmed at 'AAA(slv)'; Outlook Stable;
--Short-term National Rating affirmed at 'F1+(slv)'.
Banco Davivienda Salvadoreno, S.A.:
--Long-term IDR affirmed at BB+'; Outlook revised to Negative from Stable.
--Short-term IDR affirmed at 'B';
--VR downgraded to 'bb-' from 'bb';
--Support affirmed at '3';
--Long-term National Rating affirmed at 'AA+(slv)'; Outlook Stable;
--Short-term National Rating affirmed at 'F1+(slv)';
--Senior Unsecured Debt Long-term Rating affirmed at 'AA+(slv)';
--Senior Secured Debt Long-term Rating affirmed at 'AAA(slv)';
--Senior Unsecured Debt Short-term Rating affirmed at 'F1+(slv)';
--Senior Secured Debt Short-term Rating affirmed at 'F1+(slv)'.
Inversiones Financieras Davivienda S.A.:
--Long-term National Rating affirmed at 'AA+(slv)'; Outlook Stable;
--Short-term National Rating affirmed at 'F1+(slv)'.
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);
--'Rating Financial Institutions Above the Sovereign' (Dec. 11, 2012);
--'El Salvador' (July 16, 2013).
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
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=796779
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