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Fitch Upgrades Grupo Aval to 'BBB'; Outlook Stable
July 21, 2014 / 8:02 PM / 3 years ago

Fitch Upgrades Grupo Aval to 'BBB'; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, July 21 (Fitch) Fitch Ratings has today upgraded Grupo Aval Acciones y Valores S.A.'s (Grupo Aval) Issuer Default Rating (IDR) to 'BBB' from 'BBB-'. The Rating Outlook is Stable. A complete list of rating actions is provided at the end of this release.KEY RATING DRIVERS VR AND IDR Fitch has upgraded Grupo Aval's ratings following the upgrade of Banco de Bogota, Grupo Aval's largest operating subsidiary (see Fitch Upgrades Banco de Bogota to 'BBB+'; Outlook Stable' available at fitchratings.com) as the bank has maintained a sound performance and its solid balance sheet while strengthening its franchise in Central America through well though-out acquisitions that complement its subsidiary's (BAC's) operations in Guatemala and Panama. Other operating assets for Grupo Aval include three niche banks in Colombia and a network of well positioned Central American banks (owned by Banco de Bogota). Under Fitch's rating criteria there is a close link between the credit worthiness of a holding company and its main operating subsidiary. Grupo Aval's ratings reflect the sound competitive position and strong performance of its operating companies, as well as the group's, moderate debt, adequate debt service coverage ratios and modest double leverage. Fitch's view of Grupo Aval's creditworthiness also considers the diversification of its business mix towards Central America - a region whose macroeconomic fundamentals lag behind those of Colombia - which introduces a somewhat higher risk in its asset and revenue mix; however, a relevant part of the group's operating income comes from investment grade Central American subsidiaries. At the same time, Fitch has withdrawn the group's viability rating (VR). According to Fitch's criteria, VR's can be assigned to operating financial holding companies. Despite the evident control and coordination between the different operating subsidiaries, Grupo Aval is not an operating holding company. SUPPORT RATING AND SUPPPORT RATING FLOOR While Fitch considers that Grupo Aval's largest operating companies in Colombia are likely to receive support from Colombia's government should it be required, such support is not expected to be extended to bank holding companies. GRUPO AVAL LTD. DEBT The senior guaranteed bonds issued by Grupo Aval Ltd. are guaranteed by Grupo Aval hence they achieve a rating at the same level of Grupo Aval's IDR. RATING SENSITIVITIES IDR Grupo Aval's IDR would be underpinned by a sustained performance at each operating company; stronger debt service coverage ratios improved operating conditions in Central America that would reduce the risk the group takes in this region. Further improvements in regards the regulation of bank holding companies in Colombia may also be beneficial. On the other hand, a substantial increase in the group's leverage (double leverage above 120%) or a decline in the dividend flows from the operating companies that would, as a whole, result in a deterioration of its debt coverage ratios would pressure Grupo Aval's ratings. SUPPORT RATING AND SUPPPORT RATING FLOOR Grupo Aval's SR and SRF would be affected if Fitch changes its assessment of the government's ability and/or willingness to support the bank. GRUPO AVAL LTD. DEBT The ratings of Grupo Aval Ltd.'s debt would move in line with the company's IDR. Fitch has taken the following rating actions on Grupo Aval: --Long-term foreign currency Issuer Default Rating (IDR) upgraded to 'BBB' from 'BBB-'; Outlook Stable; --Short-term foreign currency IDR affirmed at 'F3'; --Long-term local currency IDR upgraded to 'BBB' from 'BBB-'; Outlook Stable; --Short-term local currency IDR affirmed at 'F3'; --Viability rating withdrawn at bbb-; --Support rating affirmed at '5'; --Support rating floor affirmed at 'NF'; --Senior unsecured guaranteed debt issued by Grupo Aval Ltd. upgraded to 'BBB' from 'BBB-'. Contact: Primary Analyst Diego Alcazar Director +1-212-908-0396 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Sergio Pena Associate Director + 57 1 326-9999 Committee Chairperson Franklin Santarelli Managing Director +1-212-909-0739 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). Applicable Criteria and Related Research: Global Financial Institutions Rating 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.

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