TEXT-Fitch revises Banco Industrial outlook to positive

Mon Oct 1, 2012 5:42pm EDT

Oct 1 - Fitch Ratings has affirmed the Guatemalan Banco Industrial's (BI)
long-term Issuer Default Rating (IDR) at 'BB'. The agency also revised the
bank's Rating Outlook to Positive from Stable. A full list of BI's rating
actions follows at the end of this press release.

The Positive Outlook reflects Fitch opinion that BI's capitalization metrics
would reflect gradual enhancements in the next two years, achieving a Fitch Core
Capital figure of around 12% of risk weighted assets. This follows BI's Board of
Directors' recent agreement to make a capital injection of US$30 million in
fresh capital in January 2013 and to reduce the pay-out dividend ratio to around
40% of the 2012 financial results. BI's IDR could be upgraded if the bank
sustains the 12% capitalization level over the next two years; otherwise, the
Outlook would return to Stable.

BI's IDRs are driven by its strong national franchise, sound asset quality, good
efficiency, ample deposit base, and sound liquidity which, in turn, are
reflected in the bank's Viability rating. BI's ratings are constrained by its
modest capitalization, moderate profitability, and the relatively high loan
portfolio concentrations.

BI's modest capital position remains pressured given the bank's anticipated
asset growth (double-digits for 2012-2013) and BI's holding (Bicapital)
dependence upon dividends from its operating subsidiaries to service its debt.
Currently, BI's Fitch Core Capital as a proportion of risk weighted assets is
modest and relatively similar to its historical average (June 2012: 10.1%;
2008-2011: 10.6%). However, with the recent capitalization actions the Board has
agreed to, the bank expects to reach a Fitch Core Capital of more than 12% for
end 2013, which is considered feasible by Fitch as long as the bank keep its
asset growth trend under control. Bicapital's debt arose from the past
acquisition of the Honduran Banco del Pais (Banpais), which is reflected in
Bicapital's double leverage of 116%, as of march 2012, although this is lower
than when Banpais was acquired (150%).

BI boasts a sizable base of recurring, stable, diversified, and low-cost
customer funding, benefiting from the bank's strong franchise and adequate
distribution network. The bank has also made efforts to lengthen the duration of
its liabilities through subordinated borrowings and securitization during 2011.

BI's credit quality remains sound and compares positively with its main peers.
The bank's impaired loans, net charge-offs, and restructured ratios are low and
similar to historical averages. BI's financial performance is favoured by its
good efficiency levels, which compare positively with the Guatemalan banking
system and regional peers. However, its low net interest margin (NIM) and low
portion of non-financial income limit its financial results.

Established in 1968, BI is Guatemala's largest bank, with a market share of
27.6% and 25.4% of the total assets and deposits as of June 2012. BI's primary
focus is on commercial and corporate banking. BI's main shareholder is Bicapital
Corp., a holding company domiciled in Panama, with assets of US$8,985.4 million
as of June 2012. Bicapital has also owned the Honduras-based Banco del Pais
since 2007.

Fitch affirms ratings and revised Outlooks on Industrial as follows:

--Long-term IDR at 'BB'; Outlook to Positive from Stable;
--Short-term IDR at 'B';
--Local-currency long-term IDR at 'BB'; Outlook to Positive from Stable;
--Local-currency short-term IDR at 'B';
--Viability Rating at 'bb';
--Support at '3';
--Support Rating Floor at 'BB-';
--Subordinated Tier I Capital Notes debt at 'B-';
--National scale long-term rating at 'AA-(gtm)'; Outlook to Positive from
Stable;
--National scale short-term rating at 'F1+(gtm)'.

Fitch affirms ratings on Industrial Subordinated Trust as follows:
--Industrial Subordinated Trust Tier II debt at 'BB-'.

Additional information is available on 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Treatment of Hybrids in Bank Capital Analysis' (Jul. 9, 2012);
--'National Rating Criteria' (Jan. 19, 2011);
--'Central American Banks Withstand Financial Contagion Well-Positioned for
Growth' (Jul. 9, 2012);
--'Improved Efficiency Could Boost Credit Profiles of Central American Banks'
(Mar. 7, 2012);
--'Guatemala' (July 31, 2012).

Applicable Criteria and Related Research:
Guatemala
Central American Banks Withstand Financial Contagion Well-Positioned for Growth
National Ratings Criteria
Treatment of Hybrids in Bank Capital Analysis
Global Financial Institutions Rating Criteria
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