RPT-Fitch reviews Panamanian mid-sized banks' ratings

Thu Oct 31, 2013 5:01pm EDT

SAN SALVADOR, October 31 (Fitch) Fitch Ratings has completed a peer review of 
the following seven Panamanian mid-sized banks: Banco Aliado, S.A. (Aliado), 
Banco Panameno de la Vivienda, S.A. y Subsidiarias (Banvivienda), Banesco, S.A. 
(Banesco), Credicorp Bank, S.A. (Credicorp), Global Bank Corporation (Global), 
Towerbank International, Inc. (Towerbank) and Multibank, Inc. (Multibank).

The banks included in this review have assets ranging from $800 million to 
$4,000 million with operations mainly in Panama. The ratings for this group of 
banks are based on their intrinsic strength rather than external support. The 
banks reviewed are owned by domestic investors, excluding Banesco. A full list 
of rating actions is provided at the end of this release.

RATING ACTIONS

Fitch has affirmed the ratings of Aliado, Banvivienda, Banesco, Global, 
Multibank and Towerbank after assessing their credit profiles and concluding 
that their relativities with peers remain unchanged.

At the same time, Fitch upgraded Credicorp's long-term national rating as a 
result of its strengthened risk profile relative to its peers. Credicorp's 
consistent improvement in capital ratios in recent years, along with its ability
to sustain a loan loss reserve coverage coherent with its risk profile, has 
strengthened its capacity to absorb losses. The combination of consistent, 
albeit moderate, profitability and the capitalization of profits, boosted the 
bank's capital ratios. Fitch expects Credicorp to continue performing 
adequately, maintaining profitability levels similar to industry averages based 
on outstanding credit quality and good efficiency. The agency estimates that the
bank's Fitch Core Capital will remain above 14%, exceeding the banking system's 
average. 

KEY RATING DRIVERS

CREDICORP

Credicorp's ratings are based on the good quality of its assets, relatively high
capital ratios and moderate but consistent profitability. The ratings are 
constrained by its relatively small size, the correlation of its performance 
with the economic cycle and the moderate levels of concentration on both sides 
of the balance sheet.

ALIADO

The bank's ratings reflect its low risk appetite, consistent strategy, expertise
in its target market and good liquidity mostly comprised of bank deposits. The 
ratings also reflect the bank's ability to maintain its capital position and 
grow at rates higher than the system average given its conservative dividend 
pay-out policy. The ratings also take into account the modest but consistent 
returns, low revenue diversification and relatively high loan and deposits 
concentrations.

BANVIVIENDA

Banvivienda's current ratings are based on the effective execution of its 
strategy, adequate capital ratios, steady growth of operating profit and 
improved credit risk management. The ratings also take into account the 
structural tenure mismatch, high concentrations in main depositors and low 
efficiency, which continues limiting profitability.

BANESCO

Banesco's ratings reflect the bank's accelerated growth in previous years 
coupled with their customer's adequate payment behaviour. The ratings also 
factors in the bank's sustained profitability, exceeding the system's average 
and its moderate capitalization. Also, the ratings convey the bank's links with 
its related company, Banesco Banco Universal, based in Venezuela. 

Leveraged by the Venezuelan bank's franchise, Banesco has access to customer 
deposits of that country, which are fundamental to the business development and 
define the risk profile of the Panamanian entity. These low-cost deposits have 
helped sustain profitability and have financed the loan portfolio's rapid growth
within Panama. However, their short term nature poses a higher maturity mismatch
for the bank relative to its peers, which is closely monitored by the bank.

GLOBAL

Global's ratings consistent strategy, improving capitalization ratios, sound 
positioning within its core market and consistently good asset quality 
indicators support its ratings. Also, the bank's limited revenue diversification
and moderate loan portfolio concentration by size was taken into account. Global
has a more diversified funding than the peers included in this review, 
nevertheless, its franchise is still smaller than that of largest Panamanian 
banks.

MULTIBANK

Multibank's national ratings, Issuer Default Ratings (IDR) and Viability Ratings
(VR) are based on its clear strategy, consistent performance, good asset quality
and adequate capital and reserves. The ratings also factors in the improved 
funding mix and adequate liquidity, as well as the challenges faced by the bank 
to improve its market position and increase profitability in a highly 
competitive market.

The support rating of '5' reflects Fitch's opinion that external support for 
Multibank cannot be relied upon. Thus, there is no reasonable presumption of 
potential support being forthcoming, which is reflected in the bank's 'No Floor'
(NF) rating.

TOWERBANK

Towerbank's ratings are based on its good and consistent credit quality, high 
liquidity and progress in its loan portfolio diversification by economic sector.
Concentrations in the largest debtors and depositors are still high, despite 
having fallen in the past year. The bank's ratings are also limited by the tight
capital ratios, resulting in a moderate loss absorption capacity, below that of 
its peers.

RATING SENSITIVIES

CREDICORP

The Stable Outlook indicates that Fitch does not anticipate changes in the 
bank's ratings in the foreseeable future. However, over the medium term, a 
material strengthening of its franchise, competitive position, and 
diversification, coupled with a sustained or improved financial profile, could 
gradually affect its ratings positively.

Further increases in the concentration of the portfolio's largest debtors and/or
related borrowers, could pressure the ratings downward, as they would increase 
the bank's balance sheet sensitivity to changes in the economic environment. 
Moreover, a setback in the positive trend reflected by the capital position or 
lower loan loss reserve coverage could also be negative for the ratings as it 
weakens the bank's capacity to absorb losses.

ALIADO

Further diversification and expansion of the bank's business volume that leads 
to a material reduction in lending and deposit concentrations as well as to a 
more diversified revenue structure, could improve the bank's ratings. 

Given the bank's limited scope to absorb losses, deterioration in the credit 
quality of main debtors could compromise profitability and/or capital position 
and consequently negatively affect current ratings.

BANVIVIENDA

Improvements in Banvivienda's ratings would come from the sustained 
strengthening in operating profit resulting in sufficient internally generated 
capital to support asset growth. In addition, further progress in the 
diversification and quality of the loan portfolio, accompanied by sustained 
improvements in maturity mismatch would have a positive effect on the ratings.

Although it is not Fitch's base case scenario, negative changes in the bank's 
ratings would result from a sharp deterioration in asset quality that weaken 
profitability and drive a reduction in the Fitch Core Capital ratio below 10%.

BANESCO

Further maturity achieved by the bank's portfolio that  consolidates the 
customer's good payment behavior to date, would improve the ratings. Also, the 
ratings would benefit from a reduction in the asset and liability gap, a greater
proportion of local deposits as well as extension of the liabilities average 
tenor.

The bank's ratings would be pressured by the deterioration in the portfolio's 
quality leading to a weakening of the Fitch Core Capital ratio below 10%, as 
well as significant increases in the volatility of deposits.

GLOBAL

Improved ratings depend on the continued strengthening of the bank's capital, 
driven by internal capital generation sufficient to sustain the expected growth 
in assets. The ratings would also be benefited from improvements in revenue 
diversification, as well as an increase in the net interest margin, resulting in
a greater ability to absorb losses in a stress scenario. 

F

Global's ratings would be downgraded given a severe deterioration in asset 
quality or a decline in its financial performance, resulting in a Fitch Core 
Capital ratio below its recent average.

MULTIBANK

Consistent progress in the bank's capital, driven by sufficient internal capital
generation to support the expected growth of assets would lead to an improvement
in the bank's ratings. Additionally, the ratings could improve in the medium 
term if the bank continues to increase its market share and diversify its 
revenues while maintaining low concentrations on both sides of the balance sheet
and good asset quality.

Multibank's ratings could be negatively affected by unexpected deterioration in 
asset quality that weaken profitability and erode capital and reserves cushion. 
Additionally, that overstretches the bank's capital (i.e., Fitch Core Capital 
below 9%) could also be negative. Furthermore, an extension of the average tenor
of its loans without a corresponding extension of its liability maturity profile
would be a rating negative.

TOWERBANK

Improvements in Towerbank's ratings would come from a sustained reduction in the
concentration on the largest debtors and depositors (top 20 borrowers and 
depositors below 20%). Also, a stronger Fitch Core Capital ratio (above 12%), 
could improve the ratings. 

On the other hand, the ratings would be downgraded given a significant 
deterioration in asset quality, decline in profitability, and/or distribution of
dividends amid aggressive expansion involving a decrease in Fitch Core Capital 
below 8%. Additionally, impairments in the liquidity position and increases in 
maturity mismatches could pressure the ratings downward.

Fitch upgraded Credicorp's long-term national rating and affirmed its short-term
national rating as follows:  

Credicorp 

--National long-term rating upgraded to 'A+(pan)' from 'A(pan); Outlook Stable;

--National short-term rating affirmed at 'F1(pan)'.

Fitch has affirmed the ratings for Aliado, Banvivienda, Banesco, Global, 
Towerbank and Multibank as follows:

Aliado

--National long-term rating affirmed at 'A(pan)'; Outlook Stable;

--National short-term rating affirmed at 'F1(pan)'.

Banvivienda:

--National long-term rating affirmed at 'BBB+(pan)'; Outlook Stable;

--National short-term rating affirmed at 'F2(pan)'.

Banesco:

--National long-term rating affirmed at 'BBB-(pan)'; Outlook Stable;

--National short-term rating affirmed at 'F3(pan)'.

Global:

--National long-term rating affirmed at 'AA-(pan)'; Outlook Stable;

--National short-term rating affirmed at 'F1+(pan)'.

Towerbank:

--National long-term rating affirmed at 'A(pan)'; Outlook Stable;

--National short-term rating affirmed at 'F1(pan)'.

Multibank:

National Ratings

--National long-term rating affirmed at 'AA-(pan)'; Outlook Stable;

--National short-term rating affirmed at 'F1+(pan)'.

International Ratings

--Long-term IDR affirmed at 'BB+'; Outlook Stable;

--Short-term IDR affirmed at 'B'.

--VR affirmed at 'bb+';

--Support Rating affirmed at '5';

--Support Rating floor affirmed at 'NF';

Contact: 

Primary Analyst (Aliado)

Mario Hernandez

Associated Director

+503 2516-6614

Fitch Centroamerica, S.A.

Edificio Plaza Cristal, Tercer Nivel, San Salvador

Primary Analyst (Banvivienda)

Alvaro Castro

Associated Director

+503 2516-6615

Fitch Centroamerica, S.A.

Edificio Plaza Cristal, Tercer Nivel, San Salvador

Primary Analyst (Banesco y Global)

Rolando Martinez

Director

+503 2516-6619

Fitch Centroamerica, S.A.

Edificio Plaza Cristal, Tercer Nivel, San Salvador

Primary Analyst (Credicorp)

Marcela Galicia

Director

+503 2516-6616

Fitch Centroamerica, S.A.

Edificio Plaza Cristal, Tercer Nivel, San Salvador

Primary Analyst (Towerbank)

Carmen Matamoros

Associated Director

+503 2516-6612

Fitch Centroamerica, S.A.

Edificio Plaza Cristal, Tercer Nivel, San Salvador

Primary Analyst (Multibank)

Diego Alcazar

Director

+1-212-908-0396

Fitch Ratings, Inc.

One State Street Plaza

New York, NY 10004

Secondary Analyst

Rene Medrano

Senior Director

+503 2516-6610

Secondary Analyst

Theresa Paiz-Fredel

Director Senior

+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'.

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