TEXT-Fitch assigns Tanner Servicios Financieros international ratings

Thu Nov 15, 2012 12:16pm EST

Nov 15 - Fitch Ratings has assigned the following International ratings to
Tanner Servicios Financieros S.A. (Tanner):

--Long-Term Issuer Default Rating 'BBB-';
--Short-Term Issuer Default Rating 'F3';
--Local Currency Long-Term Issuer Default Rating 'BBB-';
--Local Currency Short-Term Issuer Default Rating 'F3';

Tanner's ratings reflect its solid and stable financial performance throughout
the economic cycles, increased income diversification, and the positive
long-term perspectives in the different segments where it operates. Credit risk
ratios are low and controlled; loan portfolio is relatively short term
(factoring facilities represent around 43% of total loans) and shows no debtor
concentrations. Also, even when funding is wholesale and relatively concentrated
in nature, is composed by a healthy mix of bank financing lines and debt capital
market issuances, while asset and liability management is prudent in terms of
tenors, yields and currency. Tanner capital position is considered adequate,
debt levels show a decreasing trend since 2007; while a recent capital injection
will help to fund future expected growth and maintain adequate leverage levels.


Tanner's ratings are limited by its relatively small size and relatively narrow
business model that results in concentrations on its operations and revenue
sources. Also, recent fast growth will require more seasoning of its lending
exposures that may result in some asset quality pressures. A more moderate loan
growth and the preservation of its historic asset quality trends will bode well
for its financial profile.

The Rating Outlook is Stable. However, a sustained reduction of Tanner's
performance, and or unexpected deterioration of its asset quality that dampens
the entity's capital position would trigger a negative rating action. Further
diversification of its business model that brings diversified income may sustain
positive rating actions.

Tanner's performance has shown an ability to face expected and unexpected risks
throughout the economic cycles. Since 2006 it has been expanding asset and
income diversification significantly in markets different to its historic niche.
Nevertheless, in Fitch's opinion, such a trend will need to be closely monitored
in order to preserve historic asset quality ratios. Even when growth prospects
remains solid in Chile, the recent fast loan growth will require a more prudent
approach going forward in order to limit possible risks due fast loan growth; a
challenge Tanner management is well aware off.

Asset quality is adequate and credit risk is low and controlled. The portfolio
is sufficiently diversified and the entity, in Fitch's view, has a good credit
risk management control, with +90 days delinquency (installments in automotive
loans and leasing) accounting for 1.42% of the loan portfolio as of June 12
(average of 1.07% for the past 4 years), +90 days delinquency (unpaid balance)
accounting for 2.67%, with a 1.35x reserves coverage. Nevertheless, the recent
loan expansion, especially in the auto segment, have not been tested under a
sustained negative operating environment, although, current stock of loan loss
provisions and its healthy income generation may provide some room of maneuver
under such conditions.

Similar to other non-bank financial institutions, Tanner funds its operations
with a wholesale funding; a mix of bank lines (national and international) and
short- and long-term debt issuances in the capital market. Such issuances are
well structured in terms of tenors and yields, while it's continuous and active
presence in the banking and capital markets enhances the strength of this
funding source. Bank lines are diverse for an entity of this size, and the tenor
of such lines are well balanced with the assets it funds.

Tanner's asset and liability management is good and is coupled with ample
liquidity ratios. The average tenor of its assets (20.2 months) moderately
exceeds the average tenor of its liabilities (14 months), which is considered
prudent given the non-retail nature of its funding and the possible exposure to
changes on market sentiment due idiosyncratic risks or systemic risks that may
affect non-bank financial institutions. Tanner's liquidity risk is controlled
using a high numbers of liquidity metrics that include fragmentations of
maturities, liquidity reserves, stress scenarios simulations, etc. The
short-term nature of the factoring portfolio may act as an additional source of
liquidity in case of stress.

Tanner's capital metrics are good and exhibit a decreasing leverage. Prudent
capitalization policies have yielded significant improvement on Tanner's
leverage and capitalization ratios. A recent capital injection of USD 40 million
will help to fund future loan expansion and preserve capital flexibility.
Current liabilities to equity ratio of 4.8x as of June 2012 will temporarily
decrease due the aforementioned capital injection, but will likely back up as
soon new capital is deployed and loan demand remains robust. Tanner management
expected that the liabilities to capital ratio will not exceed 6x, well below
current covenants on some its debt commitments.

Established in 1993, Tanner is one of the largest no bank financial institution
in Chile (USD 829.6 million in total assets and USD142.6 mln in equity as of
June 2012) with a market share of around 9% in the factoring industry granted by
the financial institutions that compose Chilean association of factoring
enterprises (ACHEF). Tanner's loan portfolio is composed mainly by factoring
loans (43%), car loans (42%) and leasing operations (13%).

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Finance & Leasing Companies Criteria' (Dec. 12, 2011);
--'National Ratings Criteria' (Jan. 19, 2011);
--'Evaluating Corporate Governance' (Dec. 13, 2011).

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
National Ratings Criteria
Evaluating Corporate Governance
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