Overview -- The ratings on Citibank Uruguay incorporate the parent's full and timely support, but are constrained by the sovereign rating on Uruguay. -- We are affirming our 'BBB-/A-3' global scale ratings on the bank. -- The stable outlook reflects the outlook on the sovereign credit ratings on Uruguay. -- We expect Citibank Uruguay to increase its credit portfolio, benefiting from Uruguay's sound economic growth prospects, while maintaining good credit fundamentals. Rating Action On Nov. 30, 2012, Standard & Poor's Ratings Services affirmed its 'BBB-/A-3' global scale counterparty credit ratings on Citibank N.A. (Uruguay Branch). The outlook is stable. Rationale The ratings on Citibank Uruguay reflect sovereign risk and the fact that the bank is a branch of New York-based Citibank N.A. (A/Negative/A-1). Standard & Poor's assumes that absent the sovereign's direct intervention, the parent would ensure full and timely payment of the Uruguayan branch's financial obligations. The sovereign credit ratings on Uruguay (Oriental Republic of) (BBB-/Stable/A-3) constrain the ratings on Citibank Uruguay. The national scale ratings on the bank exclude sovereign intervention risk and indicate its position relative to other financial institutions. As of Sept. 30, 2012, the bank's total assets were Uruguayan peso (UYP) 29.7 billion ($1.42 billion). Citibank Uruguay is the fifth-largest bank among the 11 private banks operating in Uruguay, with a market share of 8.4%. Compared with Citibank's operations in other countries, its Uruguayan operation is relatively small and focuses mainly on the wholesale business, especially on large multinational corporations. Additionally, Citibank Uruguay works actively with the country's public sector. Citibank Uruguay follows the same policies and procedures as Citigroup worldwide, focusing on risk management, credit, and treasury. As part of Citigroup's world network, the bank benefits from high financial flexibility and constant support in terms of business and product development. Citibank Uruguay, in our opinion, has very good credit quality, as seen in its very low nonperforming loans (NPLs). The bank enjoys a healthy asset quality partly as a result of the good performance of the Uruguayan economy and its relatively large corporate loan portfolio--the bank posted NPLs of only 0.26% of total loans as of Sept. 30, 2012, which compares favorably with the banking system. Also, its loan loss reserves were 8.8x of NPLs as of Sept. 30, 2012. Given its historic low level of NPLs and as the bank increases its intermediation level, we expect higher NPL ratios. However, we continue to expect Citibank Uruguay to manage its loan portfolio growth through conservative and prudent underwriting standards. We believe NPLs will remain below 1% for the next 18 months. We expect Citibank Uruguay's profitability to remain adequate. Results for the nine months ended Sept. 30, 2012 showed a return on adjusted assets of 1.0%, which compared favorably with 0.8% for the same period of 2011. A higher financial margin and lower noninterest expenses helped the results. We believe that the bank's profitability will continue to improve as interest rates increase and credit activity continues to rise in Uruguay. In our opinion, the bank's capitalization level is adequate, given its condition as branch of Citibank New York. Citibank Uruguay has also an adequate liquidity with cash, money-market instruments, and liquid market securities representing about 31% of total assets and 70% of the deposits maturing within a month as of Sept. 30, 2012. We expect the bank to maintain liquidity at current levels. Outlook The stable outlook reflects the outlook on the sovereign credit ratings on the Oriental Republic of Uruguay. Related Criteria And Research -- S&PCorrect: BICRA On Uruguay Revised To Group '7' From '8', May 30, 2012 -- Banks: Rating Methodology And Assumptions, Nov. 9, 2011 -- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011 -- Group Rating Methodology And Assumptions, Nov. 9, 2011 -- Banks: Bank Capital Methodology And Assumptions, Nov. 9, 2011 -- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011 Ratings List Ratings Affirmed Citibank N.A. (Uruguay Branch) Counterparty Credit Rating BBB-/Stable/A-3 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.