March 1, 2017 / 5:09 PM / 3 years ago

Fitch Affirms Banco Macro's IDR at 'B'; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, March 01 (Fitch) Fitch Ratings has affirmed Banco Macro S.A.'s (Macro) Foreign and Local Currency Long-term Issuer Default Ratings (IDR) at 'B' and its Viability Rating (VR) at 'b'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS IDRS AND VR Despite recent improvements in Argentina's economic policy framework and normalizing relations with foreign creditors, the still adverse operating environment is the principal driver of Macros' VR and IDRs. In Fitch's view, a reduction in regulatory risk, a correction of macroeconomic imbalances and economic recovery, will take time to materialize. Macro's ratings also factor in the bank's sound and stable franchise, adequate and resilient earnings, well-controlled asset quality, high loss absorption capacity, as well as its stable funding and good liquidity. Macro focuses primarily on low- and middle-income individuals and small- and medium-sized companies, ranking fourth among private sector banks with a market share of 5.5% of the banking system by assets at October 2016. Macro has a relatively higher risk appetite than its closest peers due to its middle market, retail focus. Nevertheless, it demonstrates sound risk control. Non-performing loans (NPLs) represented 1.5% of gross loans at September 2016 (1.6% as of December 2015), in line with the private sector peers. Loan impairment charges have also improved slightly to 1.4% of average gross loans at September 2016 (1.6% at December 2015) while maintaining ample reserve coverage equivalent to 153.4% of NPLs. Macro's capitalization has historically been sound, supported by strong internal capital generation and earnings retention. Fitch core capital (FCC) recovered to 17.3% of risk weighted assets at September 2016 (14.8% at December 2015) after exceptionally strong asset growth in 2015 caused a modest deterioration in capital metrics. While the bank plans to continue growing over the medium term, either organically or through acquisitions, Fitch expects Macro's capitalization ratios to remain adequate. Macro's financial performance is supported by solid and diversified earnings, well-contained operating costs and stable provisioning, comparing favorably to the banking system average. In addition, Macro's main funding source is its ample retail deposit base. As of September 2016, customer deposits accounted for 75.1% of total funding liabilities. The bank's deposit base shows a certain degree of concentration, partially explained by its financing agent business. As of December 2015, top 20 depositors represented 19.2% of total deposits. In Fitch's opinion, the risk of this concentration is mitigated by the bank's adequate liquidity. As of September 2016, liquid assets (cash, bank deposits, and trading securities) represented 58.2% of customer deposits. Ratings on Macro's senior, unsecured issuances are in line with the bank's long term IDR. SUBORDINATED SECURITIES Macro's subordinated medium term notes are rated one notch below Macro's VR of 'b', reflecting loss severity. The securities, which comply with local Tier II capital requirements, are subordinated to all senior unsecured creditors. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating of '5' and the Support Rating Floor of 'NF' reflect that, although possible, external support for Macro cannot be relied upon given the sovereign's track record. RATING SENSITIVITIES IDRS AND VR Macro's IDRs, VR and senior debt ratings would likely move in line with a downgrade of Argentina's sovereign rating. In addition, Macro's ratings could be affected in the event of a material deterioration in asset quality, earnings, and/or loss absorption capacity. Fitch considers it unlikely that Argentine banks could be rated above the sovereign, making any upside potential in Macros's ratings contingent on positive developments in the sovereign rating. SUBORDINATED SECURITIES Due to the current compression in the rating of Macro's subordinated issuances, a potential upgrade of the bank's VR will not necessarily result in a similar action on outstanding subordinated notes. SUPPORT RATING AND SUPPORT RATING FLOOR Changes in the SRs and SRFs of Macro are highly unlikely in the foreseeable future. Fitch has affirmed Banco Macro's ratings as follows: --Foreign Currency Long-term IDR at 'B'; Outlook Stable; --Foreign Currency Short-term IDR at 'B'; --Local Currency Long Term IDR at 'B'; Outlook Stable; --Local Currency Short Term IDR at 'B'; --Viability Rating at 'b'; --Support Rating at '5'; --Support Rating Floor at 'NF'; --USD400 million Tier II subordinated medium term notes at 'B-/RR6'. Contact: Primary Analsyt Mark Narron Director +1-212-612-7898 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Secondary Analyst Santiago Gallo Director +56 2 2499 3320 Committee Chairperson Theresa Paiz Fredel Senior Director +1-212-908-0534 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1019897 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. 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