Reuters logo
Fitch Upgrades BBVA Banco Continental to 'A-'; Outlook Stable
May 27, 2014 / 8:36 PM / in 3 years

Fitch Upgrades BBVA Banco Continental to 'A-'; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, May 27 (Fitch) Fitch Ratings has upgraded BBVA Banco Continental's (BC) viability rating (VR) and its Issuer Default Ratings (IDRs) to 'a-' and 'A-', respectively. A full list of rating actions follows at the end of this press release. KEY RATING DRIVERS VR, IDRs AND SENIOR DEBT The upgrade of BC's, VR and IDRs is driven by the bank's consistently solid performance; sustained, healthy growth that contribute to strengthen its balance sheet. BC's cautious approach to business and track record of adequate risk management underpin its credit metrics and provide stability amid a benign operating environment. BC's viability rating and IDRs reflect its robust franchise; solid performance; strong profitability; high efficiency; solid asset quality and ample reserves; wide and low cost deposit base and adequate capital. BC has consistently been among the most profitable banks in Peru and the region thanks to its robust growth, resilient margins and high operating efficiency. In addition, the adroit management of credit risk, that minimizes credit cost, has contributed to a ROAA above 2.5% for the past six years. BC's solid top revenue line, adequate cost controls and efficiency minded staff contribute to achieve a regional benchmark efficiency ratio. Amid a sound economic backdrop, BC's moderate risk appetite, adequate credit policies and risk management tools contribute to maintain its asset quality among the best in the region. BC's strong past-due loan (PDL) level of 1.7% at YE13 and reserves that cover 2.6 times (x) PDL ratios should deteriorate slightly but remain sound. Funding is wide based, stable, diversified with a growing share of professional and capital markets. Funding cost is moderate in line with the system's average albeit growing slightly, at par with the market. Capital markets funding provides the bank with lower funding costs and long-term funding, which improves asset/liability matching. Sound profitability and earnings retention underpin BC's capital, which declined from its peak in 2009 due to BC's solid growth, but consistently retains a Fitch Core Capital ratio of about 10%. Stringent regulation effectively creates a floor under BC's Fitch core capital (FCC) ratio, which remains close to its peers' average and compares well to similarly rated banks. In addition, BC's strong LLR create an additional cushion as LLR exceed 90-day PDLs in an amount equivalent to about 25% of Fitch Core Capital. Ample cash and equivalents positions coupled with a low-risk, liquid investment portfolio, reflect the bank's desire to maintain ample liquidity to face any stress. BC is considered a strategic subsidiary of BBVA (rated 'BBB+'/Outlook Stable) and as such could expect timely support if it were needed. Support from its parent is not factored in the ratings at this point. SUPPORT RATING AND SUPPORT RATING FLOOR BC's 22% market share in deposits and its strong presence in all business segments make it a key player in Peru's financial sector. Support from the government should be forthcoming in case of need; Peru's ability to provide such support is reflected in its Sovereign Rating ('BBB+/A-') and underpins BC's Support and Support Rating Floor ratings; the latter was upgraded to reflect Peru's last sovereign upgrade during 4Q13. CONTINENTAL TRUSTEES (CAYMAN) LTD (CTCL) Fitch has upgraded the rating of the loan participation notes issued by CTCL to 'BB+' from 'BB'. The notes are secured by the rights to a junior subordinated loan extended to BC. CTLC's notes, rated four notches below the bank's VR, have strong equity-like features including the non-cumulative deferral of the coupons and a deeper subordination. This notching reflects the incremental non-performance risk relative to that captured by the VR and the loss severity (two notches) given its deeper subordination. CONTINENTAL SENIOR TRUSTEES (CAYMAN) LTD (CSTC) Fitch has upgraded the rating of the loan participation notes issued by CSTC to 'A-' from 'BBB+'. The notes are secured by the rights to a senior loan extended to BC, hence are equalized with the long-term Foreign Currency IDR of BC. CONTINENTAL SENIOR TRUSTEES (CAYMAN) II LTD (CSTCII) Fitch has upgraded the rating of the loan participation notes issued by CSTCII to 'A-' from 'BBB+'. The notes are secured by the rights to a senior loan extended to BC, hence are equalized with the long-term Foreign Currency IDR of BC. RATING SENSITIVITIES VR, IDRs AND SENIOR DEBT Sustained Performance and Balance Sheet Strength: BC's VR and LC IDR could be upgraded if the bank is able to maintain its balance sheet strength and performance while improving its capitalization (FCC above 12%). In addition, its BC's IDR could benefit from a significant improvement of its parent's ability to provide support, as evidenced by BBVA's IDR. Significant Deterioration of its Performance: BC's VR and IDRs would be pressured by a sharp deterioration of the bank's performance or a larger than expected decline in asset quality that would erode the capital/ reserves cushion (90-day PDLs above 3% and FCC consistently below 9.5%). CONTINENTAL TRUSTEES (CAYMAN) LTD, CONTINENTAL SENIOR TRUSTEES (CAYMAN) LTD AND CONTINENTAL SENIOR TRUSTEES (CAYMAN) II LTD The ratings of the securities issued by these three SPVs would move in line with those of its parent. Fitch has taken the following rating actions on BC: --Long-term foreign currency IDR upgraded to 'A-' from 'BBB+', Stable Outlook; --Short-term foreign currency IDR upgraded to 'F1' from 'F2'; --Long-term local currency IDR upgraded to 'A-' from 'BBB+', Stable Outlook; --Short-term local currency IDR upgraded to 'F1' from 'F2'; --Viability rating upgraded to 'a-' from 'bbb+'; --Support rating affirmed at'2'; --Support floor revised to 'BBB' from 'BBB-'; --Senior unsecured debt at upgraded to 'A-' from 'BBB+'; Continental Trustees (Cayman) Ltd. --Senior secured junior subordinated loan participation notes upgraded to 'BB+' from 'BB'. Continental Senior Trustees (Cayman) Ltd --Senior secured loan participation notes upgraded to 'A-' from 'BBB+'. Continental Senior Trustees II (Cayman) Ltd. --Senior secured loan participation notes upgraded to 'A-' from 'BBB+'. Contact: Primary Analyst Diego Alcazar Director +1-212-908-0396 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Secondary Analyst Alejandro Tapia (BCP, BC) Director +52 81-8399-9156 Committee Chairperson Alejandro Garcia Senior Director +52-81-8399-9146 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria' (Jan. 31, 2014); --'Assessing and Rating Bank Subordinated and Hybrid Securities' (Jan. 31, 2014). Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria 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.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below