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TEXT-Fitch expects to rate Banco Davivienda senior notes 'BBB-'
Jan 22 - Fitch Ratings expects to assign a 'BBB-' rating to Banco Davivienda's (Davivienda) upcoming five-year U.S. dollar senior unsecured, unsubordinated notes. A list of Davivienda's current ratings follows the end of this press release. The notes, in the amount of up to USD500 million, will mature in five years and will carry a fixed interest rate to be set at the time of issuance. Interest payments will be made semi-annually until maturity. The final rating is contingent upon the receipt of final documents conforming to information already received. The notes will rank pari passu with the existing and future senior unsecured obligations of Davivienda, other than senior unsecured obligations preferred by statute or labor, tax and other obligations that are privileged by law. The notes will be senior to Davivienda's existing and future subordinated debt, to its capital stock and to any other instruments that may qualify as Tier I capital according to Colombian regulation. Davivienda will use the proceeds of the issuance of the notes (together with existing cash and cash equivalents) to pay for general corporate purposes. Fitch expects Davivienda's leverage to increase slightly in the short run, and that continued growth and positive returns will allow the bank to sustain adequate Fitch core capital levels. Fitch currently rates Davivienda's long-term foreign and local currency Issuer Default Ratings (IDRs) 'BBB-' with a Stable Outlook. Fitch will rate the notes at the same level as Davivienda's IDRs, which are in turn driven by Davivienda's viability rating (VR) of 'bbb-' which reflects its well-established franchise, clear long-term strategy, strong asset quality and risk management, consistent performance and improved capital base. Fitch's view of Davivienda's creditworthiness is tempered by the bank's moderate efficiency and the execution risk related to its recent acquisitions. Davivienda's VR and IDRs would benefit from an uneventful integration of its recently acquired subsidiaries in Central America, as well as from improved efficiency that would underpin its performance, while maintaining reasonable asset quality, sound reserves, and sufficient capital. On the other hand, a disruptive integration of its new subsidiaries, a significant decline in its capital ratios or a severe deterioration of its asset quality that would pressure the bottom line through increased loan loss provision requirements, would negatively affect its ratings. Davivienda is Colombia's third largest bank by assets with a market share of about 12% at end 2012. It is a universal bank operating across all business segments with a particular strength in the consumer business. The bank is controlled by Sociedades Bolivar, which has interests in the construction and insurance industries in Colombia. In late 2012, the bank closed the acquisition of the former subsidiaries of HSBC in El Salvador, Honduras and Costa Rica. This transaction has affected the bank's capital ratios and profitability but these are expected to revert to pre-acquisition levels within 18-30 months. Fitch currently rates Davivienda as follows: --Long-term foreign currency IDR 'BBB-'; Outlook Stable; --Long-term local currency IDR: 'BBB-'; Outlook Stable; --Short-term foreign currency IDR 'F3'; --Short-term local currency IDR 'F3'; --Viability rating 'bbb-'; --Support Rating '3'; --Support floor 'BB+'; --Subordinated debt 'BB+'. 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). Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria
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