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Fitch Affirms Bancaribe's IDRs at 'CCC'
December 13, 2016 / 8:59 PM / 8 months ago

Fitch Affirms Bancaribe's IDRs at 'CCC'

(The following statement was released by the rating agency) NEW YORK, December 13 (Fitch) Fitch Ratings has affirmed Banco del Caribe, C.A. Banco Universal's (Bancaribe) Viability Rating (VR) at 'ccc' and its Issuer Default Ratings (IDRs) at 'CCC'. No Rating Outlook is assigned at this rating level. Fitch has taken this rating action following the completion of it private-sector Venezuelan banks peer review. A full list of rating actions follows at the end of this press release. Fitch affirmed the ratings as there has been no material change in Bancaribe's company profile or performance since the last review. KEY RATING DRIVERS VR, IDRS AND NATIONAL RATINGS The operating environment and capitalization highly influence the bank's VR and IDRs. Bancaribe's national scale ratings consider the same strengths and weaknesses as its international ratings but based on the relative creditworthiness of entities within Venezuela. The sovereign's creditworthiness constrains Bancaribe's international ratings due to its exposure to public sector securities, as well as vulnerability to the government's policy choices and the country's economic performance. Venezuela's IDR is currently rated 'CCC' by Fitch. High inflation distorts the comparison of financial metrics with regional peers (Latin American commercial banks with a VR of 'b+' and below). Robust asset growth in nominal terms continues to pressure Bancaribe's capital ratios. The ratio of regulatory total capital to risk-weighted assets for September 2016 (12.30%) is below the 13.9% average for the years 2012-2015 and is approaching the minimum requirement in Venezuela. Fitch is concerned that these tight capital ratios will reduce Bancaribe's financial flexibility and increase regulatory uncertainty for the bank. Retail deposits provide the backbone of the bank's funding base. Bancaribe's strategy is to focus on very short-term deposits and/or demand deposits, benefiting net interest income and being less volatile than term deposits. A change in the funding mix should have a minimal impact on the bank's asset and liability, at least under the current scenario of foreign exchange controls. Bancaribe's return on average assets ratio (ROAA) deteriorated during 2016. Inflation and currency depreciation led to important increase of the non-financial costs such as salaries, maintenance and imported equipment. In Fitch's view, it could be difficult to maintain stringent control of operating and credit expenses given the severe macroeconomic imbalances in Venezuela. Bancaribe has been able to preserve good nonperforming loans (NPL) to gross loans ratio although this level remains above the banking system median and compares below its larger domestic peers. At 2.6% of gross loans as of Sept. 30, 2016, Fitch views coverage of gross loans as tight, given the severity and uncertainty of the current economic, social & political crisis and historical NPL levels following economic adjustment of previous crises. SUPPORT RATING AND SUPPORT RATING FLOOR Bancaribe' Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'NF' reflect Fitch's expectation of no support. Despite the banks' systemic importance, support cannot be relied upon given Venezuela's very low rating and lack of a consistent policy on bank support. Government interference in the banking system could also negatively influence foreign shareholder support if required. RATING SENSITIVITIES VR, IDRS AND NATIONAL RATINGS The bank's IDRs and National ratings are sensitive to changes in the sovereign's IDRs, resulting in a similar action on the IDRs and VRs of the bank, which are currently capped at the sovereign. A decline in capitalization below regulatory minimums would also pressure Bancaribe's ratings. Additional government intervention that pressures the bank's financial performance could negatively affect the bank's IDRs, VRs and National ratings. While not Fitch's base case due to capital controls and liquidity in the domestic market, a persistent decline in deposits would pressure ratings. Upside potential to any of the bank's ratings in the near term is limited in light of the current economic crisis. SUPPORT RATING AND SUPPORT RATING FLOOR Venezuela's propensity or ability to provide timely support is not likely to change given the sovereign's low speculative-grade ratings. As such, the SR and SRF have no upgrade potential. Fitch has affirmed Bancaribe's ratings as follows: --Long-term foreign and local currency Issuer Default Ratings at 'CCC'; --Short-term foreign and local currency ratings at 'C'; --Viability rating at 'ccc'; --Support at '5'; --Support floor 'NF'; --National long-term rating at 'A-(ven)' --National short-term rating at 'F2(ven)'. Contact: Primary Analyst Theresa Paiz-Fredel Senior Director +1-212-908-0534 Fitch Ratings, Inc. 33 Whitehall St New York, NY 10004 Secondary Analyst Andres Marquez Director +571 3269999 Ext 1220 Committee Chairperson Alejandro Garcia Managing Director +1-212-908-9137 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Summary of Financial Statement Adjustments Under Venezuelan banking regulation, compulsory loans are weighted at 50%. For the purposes of analyses and international peer comparison, Fitch adjusts the weightings of such loans to 100%. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here National Scale Ratings Criteria (pub. 30 Oct 2013) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1016413 Solicitation Status here Endorsement Policy 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 WEB SITE AT 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. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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