BUENOS AIRES, Argentina & SANTIAGO, Chile--(BUSINESS WIRE)--Fitch Ratings expects to assign a long-term foreign currency rating of 'A+(exp)' to Banco Santander Chile's (BSC) six year CHF100-150 million senior unsecured fixed rate notes.
KEY RATING DRIVERS
The rating assigned to BSC's new debt issuance correspond to the bank's long-term Issuer Default Rating (IDR) and ranks equal to other senior unsecured debt.
BSC's IDRs and national scale ratings remain driven by its 'a+' Viability Rating (VR) and they do not factor in any support from its parent, although it remains a strategically important subsidiary for Santander. BSC's IDRs, national ratings and VR reflect its market-leadership position and its strong franchise within Chile, whose economy continues to perform well. The ratings also reflect the bank's healthy asset quality, strong underlying profitability, albeit pressured since 2012, adequate funding and capital position, and independent management. BSC's liquidity benefits from a sizeable, historically stable, and well-diversified retail deposit base. In addition, BSC has significantly reduced refinancing risk and exposure to more price-sensitive institutional deposits by growing core deposits and building a liquidity cushion while maintaining access to capital markets without any apparent rise in funding costs. BSC's stand-alone capital is adequate for its rating category and its liquidity position is strong, while its exposure to the Santander group is negligible and constrained by stringent local regulations.
RATING SENSITIVITIES
The rating of Banco Santander Chile CHF 100 - 150 million Senior Fixed Rate Notes due 2019 would be downgraded should the bank's IDR be downgraded. BSC's long-term IDR and national long-term rating have a Negative Outlook mirroring that on Santander's ratings. A downgrade in Santander's ratings will likely lead to a downgrade of BSC's VR and IDR. This reflects the inherent linkage of a subsidiary and its parent, as BSC's IDR is currently three notches above the rating of its parent, which is the maximum Fitch considers prudent according to its rating criteria. In spite of its intrinsic strength, BSC's VR could potentially be dragged down by a further deterioration of Santander, particularly in its access to or cost of funding, although this has not been the case so far.
Downward pressure on BSC's VR could also arise from a sustained pressure on profitability stemming from further rise in loan loss provisions (LLPs) or from markedly lower liquidity or capitalization. In Fitch's view, there is limited upside potential in the near future for BSC's VR.
Fitch currently rates BSC as follows:
--Foreign and local currency long-term IDRs 'A+'; Outlook Negative;
--Foreign and local currency short-term IDRs 'F1';
--Viability rating 'a+';
--Support rating '1';
--Support rating floor 'A-';
--Long-term national rating 'AAA(cl)'; Outlook Negative;
--Short-term national rating 'N1+(cl)';
--Senior unsecured bonds 'A+' and national long-term rating 'AAA(cl)';
--USD5 billion U.S. commercial paper programme 'F1';
--Subordinated bonds national long-term rating 'AA(cl)';
--National equity rating 'Primera Clase nivel 1'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Fitch Affirms Santander's Latin American Subsidiaries' (May 28, 2013);
--'Rating FI Subsidiaries and Holding Companies'(Aug. 10, 2012).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
Rating FI Subsidiaries and Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=801361
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