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Fitch Ratings Affirms Banrural's IDR at 'BB' Following Peer Review; Outlook Stable
May 15, 2015 / 8:23 PM / 2 years ago

Fitch Ratings Affirms Banrural's IDR at 'BB' Following Peer Review; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, May 15 (Fitch) Fitch Ratings has affirmed Banco de Desarrollo Rural's (Banrural) Issuer Default Rating (IDR) at 'BB', short-term IDR at 'B', and Viability Rating (VR) at 'bb', following a peer review of Guatemala's largest banks. The National Ratings of Banrural and its subsidiary Financiera Rural, S.A. (Finrural) were also affirmed. The Rating Outlook is Stable. A complete list of all ratings follows at the end of this press release. KEY RATING DRIVERS - VR, IDRs, AND NATIONAL RATINGS - BANRURAL Banrural's VR drives its IDR and National Ratings. The operating environment has a great deal of influence on its performance. Banrural's VR also considers the bank's solid credit quality metrics, high profitability and good capitalization. Banrural's VR is closely linked to the sovereign, as it maintains a moderate exposure to public sector deposits (22% of total deposits), and significant concentration in government bonds (54% of total investments). The Guatemalan Government also holds a 17.2% stake in Banrural. Banrural maintains good credit quality. The consistency of its delinquency levels reflects the bank's adequate underwriting practices; effective collection process and employee incentive programs to support low delinquency levels. Banrural's profitability levels, above similarly rated peers, reflect the high net interest margin characteristic of its microfinance orientation. Banrural's moderate efficiency and relatively limited income diversification are partially compensated for by sustainably low credit costs. Banrural's profitability and moderate dividend payments contribute to its good capital levels. The bank's Fitch Core Capital-to risk-weighted assets stood at 15.7%, comparing positively with peers'. Banrural's growth is dynamic and often exceeds market growth; however, it is in line with the bank's internal capital generation. Banrural has a strong local franchise. It is the second largest bank in Guatemala, with a market share of 20% of assets and the widest geographic coverage. The bank's strong market position in rural areas and its unique ability to address the needs of this population grant it access to diversified and low-cost deposits. Banrural consolidates Aseguradora Rural, an insurance company and Financiera Rural. RATING SENSITIVITIES - IDRS, VR AND NATIONAL RATINGS The Stable Outlook reflects Fitch's expectation of no material changes in the bank's overall financial profile over the rating horizon. Banrural's IDRs and VR are at the same level as Guatemala's sovereign rating. Given the operating environment's high influence on Banrural's VR as well as concentrations with the government, changes in the sovereign's ratings may result in a similar action on Banrural's ratings. Banrural's national ratings reflect the bank's relative strength in the local market. Ratings would be downgraded in the unlikely scenario of a sharp decline in capitalization (below 10%), and a period of sustained low earnings (operating ROAA close to 1%). These changes may result in a VR downgrade which would also imply a downgrade in its IDR. KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR Banrural's support rating (SR) of '3' reflects Fitch's opinion that there is a moderate probability of support from the state, given Banrural's systemic importance in the banking system. This probability is limited by Guatemala's sovereign rating of 'BB'/Outlook Stable. The bank's Support Rating Floor (SRF) is one notch below the sovereign rating at 'BB-'. The bank's SRF reflects the moderate financial flexibility of the government to provide support to systemically important banks in the country and the significant presence of foreign currency funding. RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR Banrural's support SR and SRF are sensitive to changes in the sovereign rating. KEY RATING DRIVERS - NATIONAL RATINGS FINRURAL Finrural's ratings are driven by the support it would receive from Banrural, if required. In the agency's view, Finrural is highly integrated into Banrural's network of operations and organization. This is also reflected in the standardization of the brand, common service network, strategic alignment and operations in segments complementary to the bank market. RATING SENSITIVITIES - NATIONAL RATINGS - FINRURAL Changes in Finrural's ratings are contingent on changes in Banrural's capacity and/or propensity to provide support. Fitch affirms the following ratings: Banco de Desarrollo Rural: --Long-term Issuer Default Rating (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 Rating at '3'; --Support Rating Floor at 'BB-'; --National long-term rating at 'AA+(gtm)'; Outlook Stable; --National short-term rating at 'F1+(gtm)'. Financiera Rural, S.A. --National long-term rating at 'AA+(gtm)'; Outlook Stable; --National short-term rating at 'F1+(gtm)'. Contact: Primary Analyst Mark Narron Director +1-212-612-7898 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analysts Marcela Galicia Director +503 2516 6616 Edgar Cartagena Director +503 2516 6613 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria and Related Research: --Global Banks Ratings Criteria --National Scale Ratings Criteria Applicable Criteria and Related Research: Global Bank Rating Criteria here National Scale Ratings Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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.

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