NEW YORK & SAN SALVADOR--(BUSINESS WIRE)--Fitch Ratings has affirmed Central American Bank for Economic Integration's (CABEI; or Banco Centroamerica de Integracion Economica) long-term Issuer Default Rating (IDR) at 'A' and short-term IDR at 'F1'. The Rating Outlook is Stable. Fitch has also affirmed CABEI's issuances and national ratings. A full list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
CABEI's ratings reflect its consistence performance, solid financial profile, and adequate risk management. The ratings also factor in the shareholders' vested interest in sustaining the bank's expansion and the privileges conferred on CABEI by its member countries, including the preferred creditor status.
CABEI's operations are supported by a sound capitalisation that in Fitch's view will remain in line with that of other sub-regional multilateral development banks (MDBs). The bank's equity-to-asset ratio stood at a comfortable 29.8% at June 2013 while the capital-to-risk weighted assets ratio remained above the internal floor of 35%. An established track record of self-sustained profitability (three-year average ROAA: 1.6%) has supported the bank's capital position, while CABEI's recently revised capital structure demonstrates the shareholders' commitment to sustaining growth and may allow it to diversify its capital structure further.
The bank's funding maturity profile has improved over the last few years thanks to its active participation in capital markets. CABEI has the highest participation in international capital markets among Central American financial institutions and roughly 58% of its total funds are provided by bond issuance. CABEI's liquidity guidelines are solid and proved to be effective for preserving such strength in times of economic turmoil.
CABEI's asset quality remained under control, and Fitch foresees non-performing loans will likely remain low. Non-accruals account for 1% of total loans and have been recorded only in the private-sector portfolio. The bank's preferred creditor status offsets the significant loan concentration in sub-investment-grade sovereigns. Loan-loss reserve cushion is ample and covers several times the amount of overdue loans (2.9x at end-2012).
RATING SENSITIVITIES
The Stable Outlook reflects that Fitch does not anticipate substantial changes in CABEI's risk profile in the foreseeable future. However, CABEI's ratings may benefit over the medium-term from further loan diversification and from a material enhancement of its capital base. In turn, unexpected severe deterioration in the bank's financial fundamentals and/or sudden lessening of the privileges conferred on it by its shareholders could trigger a downgrade.
KEY ASSUMPTIONS
The ratings and Outlook are sensitive to a number of assumptions. Fitch assumes that member countries, even if experiencing severe difficulties, will continue to honor CABEI's preferred creditor status and exempt its private sector borrowers from any measures that may impact the transfer and/or convertibility of their debt service payments. Fitch also assumes that shareholder support will remain strong, with the expectation that paid-in capital contributions will continue to be received on time from CABEI's member countries.
Fitch has affirmed CABEI's ratings as follows:
International scale:
--Long-term IDR at 'A'; Outlook Stable;
--Short-term IDR at 'F1';
--Senior unsecured debt at 'A';
National scale:
--Long-term national rating in El Salvador at 'AAA(slv)'; Outlook Stable;
--Short-term national rating in El Salvador at 'F1+(slv)';
--Senior unsecured long-term debt in El Salvador at 'AAA(slv)';
--Long-term national rating in Honduras at 'AAA(hnd)'; Outlook Stable;
--Short-term national rating in Honduras at 'F1+(hnd)';
--Long-term national rating in Costa Rica at 'AAA(cri)'; Outlook Stable;
--Short-term national rating in Costa Rica at 'F1+(cri)';
--Senior unsecured long-term debt in Costa Rica at 'AAA(cri)';
--Senior unsecured short-term debt in Costa Rica at 'F1+(cri)';
--Senior unsecured long-term debt in Dominican Republic at 'AAA(dom)';
--Senior unsecured long-term debt in Mexico at 'AAA(mex)';
--Senior unsecured long-term debt in Panama at 'AAA(pan)';
--Senior unsecured long-term debt in Thailand at 'AAA(tha)'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Multilateral Development Banks' (May 23, 2012).
--'Rating Multilateral Development Banks - Revised Criteria and Scoring Framework' (March 12, 2012)
Applicable Criteria and Related Research:
Rating Multilateral Development Banks
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679775
Rating Multilateral Development Banks - Revised Criteria and Scoring Framework
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=672512
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=803667
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.