NEW YORK--(BUSINESS WIRE)--Fitch Ratings has completed a peer review of Guatemala's three largest banks: Banco Industrial, S.A. (Industrial), Banco G&T Continental S.A. (G&TC) and Banco de Desarrollo Rural, S.A. (Banrural). A full list of rating actions follows at the end of this press release.
RATING ACTION AND RATIONALE
Fitch has affirmed all the ratings of the largest Guatemalan banks as their intrinsic creditworthiness and relativities among the peer remain unchanged. In addition, Fitch has affirmed the issuances of Industrial Subordinated Trust (ISbT), and Industrial Senior Trust (ISnT), which are Industrial's special vehicles for these issuances.
Guatemala's largest banks are mostly defined as banks with assets between USD5 billion and USD9 billion dollars, operating locally with a network of service points covering the entire country. Two of these banks (Industrial and G&TC) are part of regional financial groups with operations in other Central American countries.
Industrial is the largest Guatemalan bank, with a corporate orientation strategy which stands out locally due to its dominant market position. The bank's strengths include its presence in the international markets, which benefits its diversification and length of funding base. However, its corporate orientation results in a moderate profitability and capitalization.
G&TC and Industrial share corporate orientation in their business strategy, as well as the good asset quality and moderate risk appetite, but they have minor differences in capitalization (higher in G&TC) and profitability (higher in Industrial). In Fitch's opinion, G&TC and Industrial have a similar risk profile, which is reflected in the shared national and international ratings. In addition, both banks have high exposures to Guatemalan government bonds (currently rated 'BB+' with a Negative Outlook by Fitch) which constrain the IDRs and VR's upside potential up to the sovereign's rating.
Banrural is mainly oriented to the retail sector, and characterized by its relatively high and long standing profitability. The high profitability, coupled with its relatively moderate dividend distribution, has allowed it to lead the peer reviewed banks in capitalization. These factors, together with its good credit quality, are reflected in international and national ratings above Industrial's and G&TC's. However, the important dependence that this bank has in its funding to the Guatemalan sovereign limits its international ratings to that of the sovereign.
BANRURAL'S KEY RATING DRIVERS - IDRs, VR AND NATIONAL RATINGS
Banrural's IDRs and VR reflect its historically high profitability and good capitalization, which compare positively with its main local peers. Banrural's ratings also reflect the bank's good credit quality and ample depository base. The ratings also consider the bank's moderate concentrations in public sector funds and the limited revenue diversification, given its main target markets (micro, and small enterprises). The support rating of '3' reflects Fitch's opinion that the bank maintains a moderate probability of support from the state, given its systemic importance in the banking system. Banrural's national ratings were affirmed and its Outlook remains Stable as the bank's relative strength in the local market remains unchanged.
G&TC'S KEY RATING DRIVERS - IDRs, VR AND NATIONAL RATINGS
G&TC's IDRs and VR are driven by its sound niche position and franchise, good asset quality and efficiency, ample deposits base and good liquidity. G&TC's ratings are tempered by its moderate capitalization and profitability, high concentration on largest debtors and related-party lending, as well as by the relatively high exposure of its investment portfolio in the local sovereign. The support rating of '3' reflects Fitch's opinion that the bank maintains a moderate probability of support from the state, given its systemic importance in the banking system. G&TC's national ratings were affirmed and its Outlook remains Stable as the bank's relative strength in the local market remains unchanged.
INDUSTRIAL'S KEY RATING DRIVERS - IDRs, VR AND NATIONAL RATINGS
Industrial's IDRs are driven by its strong national franchise, sound asset quality, good efficiency, ample deposits base, and sound liquidity, which, in turn, are reflected in the bank's VR. Industrial's ratings are constrained by its modest capitalization, moderate profitability, and relatively high loan portfolio concentrations. The support rating of '3' reflects Fitch's opinion that the bank maintains a moderate probability of support from the state, given its systemic importance in the banking system. Industrial's national ratings were affirmed and its Outlook remains Stable as the bank's relative strength in the local market remains unchanged.
ISnT AND ISbT KEY RATING DRIVERS
ISnT's rating is in line with Industrial's IDR reflecting that the senior unsecured obligations rank equally to BI's unsecured and unsubordinated obligations.
ISbT is one notch below Industrial's IDR reflecting the subordinated status, ranking junior to all Industrial's present and future senior indebtedness, pari passu with all other unsecured subordinated debt and senior to BI's capital and tier I hybrid securities.
BANRURAL'S RATING SENSITIVITIES - IDRs, VR AND NATIONAL RATINGS
A downgrade of Guatemala's sovereign ratings will result in a downgrade of Banrural's IDRs. On the other hand, if the sovereign ratings are eventually affirmed at 'BB+' and the Outlook revised to Stable from Negative, it is highly likely that Banrural's Rating Outlook would be revised accordingly. Banrural's national ratings would not be affected should Guatemala's sovereign be downgraded.
INDUSTRIAL AND G&TC'S RATING SENSITIVITIES - IDRs, VR AND NATIONAL RATINGS
Industrial and G&TC's IDR and VR upside potential is considered limited by Fitch, should Guatemala's Negative Outlook eventually result in a sovereign downgrade, considering its high exposure to the sovereign through its securities portfolio. On the other hand, a severe asset-quality deterioration, or a material decline in the bank's profitability, that affects capitalization could pressure the ratings downward.
ISnT and ISbT'S RATING SENSITIVITIES - IDR
ISnT and ISbT's ratings downgrade potential will be derived from changes in the same direction in Industrial's IDR.
Fitch has affirmed the following ratings for Banrural:
--Long-term foreign currency IDR at 'BB+'; Outlook Negative;
--Short-term foreign currency IDR at 'B';
--Long-term local currency IDR at 'BB+'; Outlook Negative;
--Short-term local currency IDR at 'B';
--Viability rating at 'bb+';
--Support at '3';
--Support Rating Floor at 'BB-';
--National long -term rating at 'AA+(gtm)'; Outlook Stable;
--National scale short-term affirmed at 'F1+(gtm)'.
Fitch has affirmed the following ratings for G&TC:
--Long-term IDR at 'BB'; Outlook Stable;
--Short-term IDR at 'B';
--Local-currency long-term IDR at 'BB'; Outlook Stable;
--Local-currency short-term IDR at 'B';
--Viability Rating at 'bb';
--Support at '3';
--Support Rating Floor at 'BB-';
--National scale long-term rating at 'AA-(gtm)'; Outlook Stable;
--National scale short-term rating at 'F1+(gtm)'.
Fitch has affirmed the following ratings for Industrial:
--Long-term IDR at 'BB'; Outlook Stable;
--Short-term IDR at 'B';
--Local-currency long-term IDR at 'BB'; Outlook Stable;
--Local-currency short-term IDR at 'B';
--Viability Rating at 'bb';
--Support at '3';
--Subordinated Tier I Capital Notes debt at 'B-';
--Support Rating Floor at 'BB-';
--National scale long-term rating at 'AA-(gtm)'; Outlook Stable;
--National scale short-term rating at 'F1+(gtm)'.
Fitch also affirmed the following ratings:
--Industrial Subordinated Trust at 'BB-';
--Industrial Senior Trust at 'BB'.
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 Hybrids Securities' (Dec. 05, 2012);
--'Central American Bank Profitability Under Pressure Despite Strong Balance Sheets' (Sept. 24, 2013);
--'Guatemala' (July 11, 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
Assessing and Rating Bank Subordinated and Hybrid Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542
Guatemala
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=713095
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=803500
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