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Fitch Places First Bancorp on Rating Watch Negative
October 5, 2017 / 7:56 PM / 2 months ago

Fitch Places First Bancorp on Rating Watch Negative

(The following statement was released by the rating agency) NEW YORK, October 05 (Fitch) Fitch Ratings has placed First Bancorp's (FBP) 'B-' Long-Term Issuer Default Rating (IDR), 'B' Short-Term IDR and 'b-' Viability Rating (VR) on Rating Watch Negative due to the uncertainty of the impact caused by Hurricane Maria on Puerto Rico. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS IDRS AND VRS The ratings have been placed on Negative Watch because Fitch believes that the challenges posed by Hurricane Maria, including massive destruction to vital infrastructure, homes, businesses, and other property, could make it difficult for FBP to maintain positive momentum in asset quality, earnings, and deposit funding metrics that the company has reported over the past several quarters. Historically, FBP's ratings have incorporated the significant challenges posed by the weak operating environment in Puerto Rico. However, going forward, Fitch expects the destruction caused by Hurricane Maria to further weaken the operating environment. Fitch also expects the hurricane's impact will complicate the Commonwealth of Puerto Rico's (PR) efforts to reverse outward migration, generate sustainable economic growth, and address its fiscal and debt imbalances. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating of '5' and Support Ratings Floor of 'NF' reflect Fitch's view that FBP is not considered systemically important, and therefore the probability of support is unlikely. The IDRs and VRs do not incorporate any support. LONG- AND SHORT-TERM DEPOSIT RATINGS FBP's uninsured deposit ratings at its subsidiary banks are rated one notch higher than FBP's IDR and senior unsecured debt rating because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default. HOLDING COMPANY FBP has a bank holding company (BHC) structure with the bank as the main subsidiary. IDRs and VRs are equalized with those of the operating companies and banks, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Double leverage is below 120% for the FBP parent company. RATING SENSITIVITIES IDRS AND VRS Fitch expects to resolve the Rating Watch Negative within the next six months. Fitch also expects that the bank's quarterly financial results as well as disclosures from the U.S. Federal Government and the Commonwealth of Puerto Rico will bring greater visibility into the potential short- and long-term effects that this unprecedented event may have on financial performance and ultimately the company's ratings. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating and Support Rating Floor are sensitive to Fitch's assumption around capacity to procure extraordinary support in case of need. LONG- AND SHORT-TERM DEPOSIT RATINGS The ratings of long- and short-term deposits issued by FBP subsidiaries are primarily sensitive to any change in the company's IDRs. This means that should a long-term IDR be downgraded, deposit ratings could be similarly affected. HOLDING COMPANY If FBP became undercapitalized or increased double leverage significantly, there is the potential that Fitch could notch the holding company IDR and VR from the ratings of the operating companies. Fitch has placed the following ratings on Rating Watch Negative: First BanCorp --Long-Term IDR 'B-'; --Short-Term IDR 'B'; --Viability Rating 'b-'. FirstBank Puerto Rico --Long-Term IDR 'B-'; --Long-term deposit 'B/RR3'; --Short-Term IDR 'B'; --Short-term Deposits 'B'; --Viability 'b-'. Fitch has affirmed the following ratings: First BanCorp --Support '5'; --Support floor 'NF'. FirstBank Puerto Rico --Support '5'; --Support floor 'NF'. Contact: Primary Analyst Stefan Kahandaliyanage, CFA Associate Director +1-646-582-4918 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Secondary Analyst Doriana Gamboa Senior Director +1-212-908-0865 Committee Chairperson Julie Solar Senior Director +1-312-368-5472 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy 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 WEB SITE AT 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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