NEW YORK & BOGOTA, Colombia--(BUSINESS WIRE)--Fitch Ratings has assigned an initial 'BBB-' long-term Issuer Default Rating (IDR) to Colombia's Financiera de Desarrollo Territorial S.A. (FINDETER). The Rating Outlook is Stable. A full list of FINDETER's ratings follows at the end of this press release.
Fitch's assessment of the Colombian government's willingness and capacity to provide timely and sufficient support drive the ratings of FINDETER which are aligned with those of the sovereign. Although the Colombian government does not explicitly guarantee FINDETER, Fitch views the entity as an integral part of the state given its role in providing financing for investment projects and economic development. In the foreseeable future, the IDRs of FINDETER will likely mirror any positive or negative rating action on the sovereign ratings.
FINDETER has a clear mandate to provide financing for infrastructure investment and promote regional and urban development. FINDETER's strategic importance in Colombia's national development plan underpins Fitch's opinion of the government's willingness of support, while the sovereign's investment grade ratings underpin its capacity.
Like other second-tier institutions, loan impairments are historically low, and are complemented by a high level of reserves. The loan portfolio is soundly diversified by economic sector and almost all of its debtors are regulated financial institutions. These factors mitigate the credit risks derived from its limited number of debtors and, like other second-tier institutions, a high loan concentration by obligor. Additionally, the institution has a legal status as a rediscount entity, which implies a preferred position in the collection of loans, relative to the rest of its clients' creditors.
FINDETER exhibits a stable but low financial performance in alignment with its public interest nature and development promotion role. The institution's target is to maintain profitability at a level higher than the reporting period's inflation to preserve the value of capital over time. As such, the institution maintains a low net interest margin that, despite good operating efficiency and low impairment charges, results in modest net income and low internal capital generation.
FINDETER'S funding is mostly dependent on local market term deposits, which are highly concentrated by depositor. Similarly, credit lines are concentrated in one of the multilateral institutions that provide funds. However, FINDETER is progressively seeking new creditors and financing mechanisms, although Fitch considers that concentration will remain in the short term.
FINDETER has exhibited a high level of capitalization. However, given low internal capital generation, the institution's equity has been pressured during periods of accelerated asset growth. Favorably, almost the entire institution's capital is Tier 1 and by law the entity cannot distribute cash dividends. In Fitch's opinion, the current level of capitalization is sufficient to support several years of growth.
FINDETER is a nationwide special official institution related to the Ministry of Finance and Public Credit that focuses on economic development. The institution's main shareholder is the government of Colombia along with other public regional shareholders. The government created the institution in 1989 by Act 57, but its legal nature was transformed by Decree 4167 in November 2011, providing more flexibility in its internal organization and in the ownership structure.
Fitch has assigned the following ratings:
- Long Term Issuer Default Rating 'BBB-'; Outlook 'Stable';
- Short Term Issuer Default Rating 'F3';
- Local Currency Long Term Issuer Default Rating 'BBB'; Outlook 'Stable';
- Local Currency Short Term Issuer Default Rating 'F3';
- Support Rating '2';
- Support Floor 'BBB-'.
Additional information available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria (Aug. 15, 2012);
Colombia Regulates Toward Basel III, Must Do More (Sept. 4, 2012);
Efficiency in Andean Banks (Sept. 13, 2012);
2012 Outlook: Andean Banks (Dec. 20, 2011);
Colombia (June 26, 2012).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
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