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Fitch Affirms Banco de los Trabajadores' IDR at 'BB-' Following Peer Review; Outlook Stable
May 15, 2015 / 7:48 PM / 3 years ago

Fitch Affirms Banco de los Trabajadores' 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 los Trabajadores' (Bantrab) long-term Issuer Default Rating (IDR) at 'BB-' following Fitch's peer review of Guatemala's largest banks. The Rating Outlook is Stable. A full list of rating actions follows at the end of this press release. BANTRAB'S KEY RATING DRIVERS - IDRs, VR, SUPPORT, SUPPORT RATING FLOOR, AND NATIONAL RATINGS Bantrab's long-term IDR and national ratings are driven by its intrinsic creditworthiness, as reflected in its Viability Rating (VR). Bantrab's VR is highly influenced by its moderate capitalization. The rating also factors in the bank's moderate franchise, sound and recurring profitability, driven by ample margins and good asset quality, as well as its concentration in the public sector and rapid loan growth. Bantrab's Support Rating and Support Rating Floor of '5' and 'NF', respectively, indicate that, although possible, external support cannot be relied upon, given the current low state ownership and limited systemic importance. Bantrab's capital position has been stable over the last year following a five-year negative trend. Although rapid asset growth has continued, capital-generation capability has strengthened significantly. Fitch's base scenario is that the bank will strengthen Fitch Core Capital metrics over the medium term as credit growth moderates. In the agency's opinion, maintaining an adequate loss-absorption cushion is necessary given high loan growth and concentration risks. Bantrab's profitability metrics are good and above the Guatemalan banking system average. Continuous improvements in efficiency, combined with higher recoveries of previously written-off loans, have benefitted the bank's financial performance. Net interest income (NII) continued to represent the most important source of operating revenue and its structure is unlikely to change given the bank's business model, which is focused primarily on lending rates. The bank's loan book has a high exposure to low- and middle-income employees, mainly from the public sector (YE2014: 97.7% of loan book); however, collection processes are effective as they rely on payroll deduction. Credit risk in the investment portfolio is mainly associated with the government (Guatemala: 'BB'/Stable Outlook by Fitch). The bank's loan book quality is good and has improved consistently over the last six years. Non-performing loans (NPLs; 90+ days overdue) to total loans declined from its peak of 8.4% at YE2009 to 1.2% at YE2014. Delinquency levels benefit from the bank's reliance on payroll deduction for collection of 92% of total loans and on sound performance of the Guatemalan economy. BANTRAB SENIOR TRUST'S LOAN PARTICIPATION NOTES' KEY RATING DRIVERS Bantrab Senior Tust's (BST) seven-year USD loan participation notes rating is in line with Bantrab's VR reflecting that the senior unsecured obligations rank equally with the bank's unsecured and unsubordinated obligations. BANTRAB CAPITAL NOTES TRUST'S LOAN PARTICIPATION NOTES' KEY RATING DRIVERS Bantrab Capital Notes Trust's (BCNT) upcoming 10-year USD subordinated loan participation notes are rated one notch below Bantrab's VR. The notching for loss severity reflects the notes' subordinated status, and the fact that they effectively rank junior to all Bantrab's present and future senior indebtedness, pari passu with all other unsecured subordinated debt, and senior to Bantrab's capital. BANTRAB'S RATING SENSITIVITIES - IDRs, VR AND NATIONAL RATINGS The Stable Outlook reflects Fitch's expectation of no substantial changes in Bantrab's risk profile in the foreseeable future. However, the bank's ratings are sensitive to a change in Fitch's assumptions around asset quality, profitability and capital position. A significant and unexpected reduction of the bank's capital ratios (Fitch Core Capital less than 11%), a period of sustained low earnings (ROAA < less than 1%) or an important deterioration in its asset quality would trigger a negative rating action. Bantrab's upside potential is considered limited by its relatively narrow business model that results in concentrations on its revenue sources. However, Bantrab's rating could be upgraded should it successfully grow with greater revenue diversification and further consolidation of its franchise, while sustaining an adequate capital position. BANTRAB SENIOR TRUST'S AND BANTRAB CAPITAL NOTES TRUST'S LOAN PARTICIPATION NOTES' RATINGS SENSITIVITIES Changes in the notes' rating are contingent on rating actions for Bantrab. Fitch has affirmed the following ratings: Banco de los Trabajadores --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 '5'; --Support Rating Floor at 'NF'; --Long-term national rating at 'A(gtm)', Outlook Stable; --Short-term national rating at 'F1(gtm)'. Financiera de los Trabajdores --Long-term national rating at 'A(gtm)', Outlook Stable; --Short-term national rating at 'F1(gtm)'. Bantrab Senior Trust --Long-term foreign currency loan participation notes at 'BB-'. Bantrab Capital Notes Trust --Long-term foreign currency loan participation notes at 'B+(EXP)'. Contact: Primary Analyst Mark Narron Director +1-212-612-7898 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Dario Sanchez Associate Director +503 2516-6608 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 at Applicable Criteria and Related Research: -- 'Global Financial Institutions Rating Criteria' dated 31 Jan. 2014. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria - Effective from 31 January 2014 to 20 March 2015 here Rating FI Subsidiaries and Holding Companies - Effective from 10 August 2012 to 20 March 2015 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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