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Fitch Affirms Banco Industrial's IDR at 'BB', Outlook Stable, Following Peer Review
May 15, 2015 / 9:03 PM / 3 years ago

Fitch Affirms Banco Industrial's IDR at 'BB', Outlook Stable, Following Peer Review

(The following statement was released by the rating agency) NEW YORK, May 15 (Fitch) Fitch Ratings has affirmed Banco Industrial's (Industrial) long-term 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 Rating Outlook is Stable. Fitch has also upgraded the bank's long-term national rating. Similar rating actions were taken on the national ratings of Industrial's subsidiaries. A full list of rating actions follows at the end of this press release. INDUSTRIAL'S KEY RATING DRIVERS - IDRs, VR, National Ratings, Support and Support Rating Floor Industrial's VR drives its IDR. The operating environment has a great deal of influence on Industrial's performance. Deterioration of the operating environment may result in pressures on the bank's financial profile. Industrial's company profile, reflected in its strong franchise and stable business model, also highly influences the ratings. These factors, together with its sound asset quality and good profitability, balance the bank's moderate capitalization and high loan concentrations. The support rating of '3' reflects Fitch's opinion that the bank maintains a moderate probability of support from the state, given its systemic importance. The support rating floor of 'BB-', one notch below the sovereign rating, is explained by 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. Industrial's long-term national rating was upgraded as the consistency of the bank's financial profile which enhances the bank's creditworthiness relative to its domestic peers. Industrial maintains a dominant market position (28% of market share in terms of assets) with strong pricing power in the corporate sector. This also helps Industrial's capacity to sustain an ample and diversified deposit base and to complement it with funding from local and international markets. BI has a comfortable liquidity cushion. Industrial's asset quality is sound, benefitted by its conservative underwriting standards and effective collection process. Industrial's non-performing loans (NPLs; +90 days) have remained below 0.8% since 2009 while reserves adequately covered its NPLs in the same years. However, Industrial faces challenges managing its high concentration of largest borrowers, although they represent well-diversified local conglomerates. The bank's good operating profitability improved slightly to 1.7% of average assets in 2014 boosted by slight enhancements in its net interest margin (NIM), good efficiency and low loan impairment charges. Further improvements in profitability will be limited by its corporate orientation and high dollarization. In Fitch's opinion, the bank's return on assets will be around 1.4% in 2015. Industrial's capitalization is moderate (Fitch Core Capital around 10%). The bank's internal capital generation is complemented by fresh capital injections when required. A potential fresh capital injection to Industrial, expected for 2015 would strengthen the bank's capital position. CONTECNICA, FINANCIERA INDUSTRIAL AND WESTRUST BANK'S KEY RATING DRIVERS - National Ratings Contecnica, Financiera Industrial and Westrust Bank's national ratings were upgraded following similar action on Industrial's national long-term rating. The national ratings of these subsidiaries are equalized with those of Industrial. These entities are important subsidiaries for Industrial given the high degree of integration with the group and operate in complementary market segments enhancing BI's business model. INDUSTRIAL'S SUBORDINATED TIER 1 CAPITAL NOTES, SUBORDINATED AND SENIOR TRUSTS KEY RATING DRIVERS Industrial's subordinated Tier I capital notes (IST-I) debt is four notches below the bank's long-term IDR given its deep subordination status and discretionary coupon omission. Industrial Subordinated Trust's Notes (ISbT) are one notch below Industrial's long-term IDR reflecting the subordinated status, ranking junior to all Industrial's present and future senior indebtedness, pari passu with all other unsecured subordinated debt and senior to Industrial's capital and tier I hybrid securities. Industrial Senior Trust's Notes' (ISnT) ratings are in line with Industrial's long-term IDR, reflecting that the senior unsecured obligations rank equally to Industrial's unsecured and unsubordinated obligations. INDUSTRIAL'S RATING SENSITIVITIES - IDR, VR, National Ratings and Support Industrial's VR and IDR upside potential is limited as the operating environment highly influences the bank's ratings. On the other hand, a sustained reduction of Industrial's FCC below 10% and/or its return on average assets (ROAA) consistently below 1% may trigger a negative review of the bank's VR and IDR. In Fitch's view, the Stable Outlook on Industrial's national ratings reflects that the bank's relative strength in the local market should remain unchanged for the foreseeable future. CONTECNICA, FINANCIERA INDUSTRIAL AND WESTRUST BANK'S KEY RATING DRIVERS AND SENSITIVITIES - National Ratings Changes in Contecnica, Financiera Industrial and Westrust Bank's ratings are contingent on changes in Industrial's capacity and propensity to provide support. INDUSTRIAL'S SUBORDINATED TIER 1 CAPITAL NOTES, SUBORDINATED AND SENIOR TRUSTS RATING SENSITIVITIES Industrial's subordinated Tier I capital notes debt, ISnT and ISbT's ratings downgrade potential will be derived from changes in the same direction in Industrial's IDR. Fitch has affirmed the following ratings: Industrial: --Long-term foreign currency IDR at 'BB'; Outlook Stable; --Short-term foreign currency IDR at 'B'; --Long-term local-currency IDR at 'BB'; Outlook Stable; --Short-term local-currency IDR at 'B'; --Viability Rating at 'bb'; --Support at '3'; --Subordinated Tier I Capital Notes debt at 'B-'; --Support Rating Floor at 'BB-'; --National scale long-term rating upgraded to 'AA(gtm)' from 'AA-(gtm)'; Outlook Stable; --National scale short-term rating at 'F1+(gtm)'. Industrial Subordinated Trust: --Industrial Subordinated Trust Tier II Debt at 'BB-'. Industrial Senior Trust: --Long-term Senior Unsecured Debt at 'BB'. Contecnica: --National scale long-term rating upgraded to 'AA(gtm)' from 'AA-(gtm)'; Outlook Stable; --National scale short-term rating at 'F1+(gtm)'. Financiera Industrial: --National scale long-term rating upgraded to 'AA(gtm)' from 'AA-(gtm)'; Outlook Stable; --National scale short-term rating affirmed at 'F1+(gtm)'. Westrust Bank: --National scale long-term rating published at 'AA(gtm)'; Outlook Stable; --National scale short-term rating published at 'F1+(gtm)'. Contact: Primary Analyst Mark Narron Director +1 212 612-7898 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Edgar Cartagena Director +503 2516 6613 Edificio Plaza Cristal, Tercer Nivel 79 Ave. Sur y Calle Cuscatlan Col. Escalon. San Salvador, El Salvador Francesca Cedrola (Primary Analyst: Westrust Bank, Financiera Industrial, Contecnica) Analyst +503 2516 6611 Committee Chairperson Theresa Paiz Senior Director +1-212-908-0534 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at 'www.fitchratings.com' and 'www.fitchcentroamerica.com'. Applicable Criteria and Related Research: --'Global Bank Rating Criteria' (March 2015) --'National Scale Rating Criteria' (October 2013). 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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