June 13, 2012 / 8:12 PM / 7 years ago

TEXT-Fitch takes actions on BBVA Latam units

(The following statement was released by the rating agency)	
    June 13 - Fitch Ratings has taken various rating actions on the Latin
America subsidiaries of Banco Bilbao Vizcaya Argentaria (BBVA), following 	
the June 11, 2012 downgrade of BBVA's Issuer Default Ratings (IDRs) and
Viability Rating. The rating actions on BBVA's Latin America subsidiaries differ	
across companies and countries. A complete list of rating actions for each 	
subsidiary is included at the end of this release.	
	
Fitch believes Latin America remains strategically important to BBVA. BBVA 	
benefits from the geographic diversification of its Latin American subsidiaries,	
which allows them to generate earnings internationally and make up for the muted	
results in Spain. The international subsidiaries are self-funded, which boosts 	
liquidity. It also minimizes contagion risk and allows the companies to issue 	
from different jurisdictions. Growth prospects for emerging markets have 	
recently been revised down, and the subsidiaries are not entirely immune to 	
global economic trends. However, earnings from emerging markets will continue to	
contribute significantly to group earnings. 	
	
On June 11 2012, Fitch downgraded BBVA's long-term foreign currency IDR to 	
'BBB+' from 'A', and the Rating Outlook remained Negative. This followed a 	
three-notch downgrade of Spain's sovereign long-term IDR (see 'Fitch Downgrades 	
Spain to 'BBB'; Outlook Negative', dated 7 June 2012 at 'www.fitchratings.com').	
	
	
The downgrade on BBVA reflects similar concerns to those that have affected the 	
Spanish sovereign rating; in particular, Spain is forecasted to remain in 	
recession through the remainder of this year and 2013 compared to the previous 	
expectation that the economy would benefit from a mild recovery in 2013. This 	
directly affects BBVA's activities in Spain. The Negative Outlook mirrors that 	
on the sovereign rating. BBVA's long-term IDRs and VRs are sensitive to a 	
further downgrade of Spain's sovereign rating (see 'Fitch Downgrades Santander &	
BBVA to 'BBB+'/Negative Outlook on Sovereign Action', dated June 11, 2012 at 	
'www.fitchratings.com').	
	
Some BBVA subsidiaries in Latin America currently exhibit an intrinsic financial	
profile better or similar to that of its parent (measured by their VRs). 	
Therefore, their IDRs are no longer derived from the expected support from the 	
parent, although it's evident such subsidiaries remain a core asset for BBVA. 	
This is the case for Banco BBVA Bancomer in Mexico (BBVA Bancomer) and BBVA 	
Continental in Peru (BBVA Continental). 	
	
Considering the systemic importance of some of the subsidiaries in their home 	
markets, Fitch has assigned a Support Rating Floor (SRF) to several 	
subsidiaries. The Mexican and Peruvian sovereigns has vested interests in 	
preserving the health of their financial systems and hence will likely provide 	
support should it be required. However, at this time the VRs of all BBVA's Latin	
America subsidiaries remain above their respective SRF as evidence of their good	
financial profiles. Fitch's SRFs indicate a level below which the agency will 	
not lower the bank's long-term IDRs.	
	
The rated subsidiaries of BBVA in Latin America shows robust financial 	
condition, strong local franchises, self-funded nature mostly within their home 	
markets, good profitability and capitalization. They do not rely on BBVA in 	
order to pursue their day to day business, and their management teams and Board 	
of directors enjoy a high degree of operating independence. Also, the improved 	
reputation, efficiency and monitoring of local regulators in Colombia, Chile, 	
Mexico, Panama and Peru provides sufficient ring-fencing to protect the local 	
subsidiaries from negative events occurring either at their parent and/or their 	
parent's sovereign. The exposure of BBVA's subsidiaries in Latin America to 	
their parent is negligible and tightly controlled by stringent local 	
regulations. 	
	
However, Fitch recognizes that the reputation of the parent and its subsidiaries	
in Latin America are somewhat interdependent and correlated, and so it's not 	
possible to completely dissociate the ratings of the parent and the 	
subsidiaries. Further downgrades at the parent level or changes in market 	
perceptions regarding the Latin America subsidiaries could trigger further 	
reviews of the ratings, and this is the basis for many of the Negative Outlooks 	
detailed below. (For additional information, see Fitch's criteria 'Rating 	
Foreign Banking Subsidiaries Higher than Parent Banks or Bank Holding Companies,	
published June 12, 2012.)	
	
Some of the subsidiaries' IDRs are still support-driven by its parent (Panama 	
and Colombia). Fitch has downgraded these subsidiaries, and their Outlook 	
remains Negative, reflecting the weakening of BBVA's ability to provide support.	
	
	
Given the current rating of the parent, Country Ceiling limitations are no 	
longer constraining any IDR.	
	
Fitch has taken rating actions on the following BBVA subsidiaries: 	
	
Banco BBVA Bancomer (BBVA Bancomer):	
	
BBVA Bancomer's IDRs and National Scale Ratings remain driven by its 'a-' VR. 	
They do not factor in any extraordinary support from its parent. BBVA Bancomer's	
IDRs, National Ratings and VR reflect its strong franchise, risk and revenue 	
diversification, resilient margins throughout different phases of the business 	
cycle, ample and stable customer deposits, as well as its reasonable asset 	
quality metrics. They also consider lower than peers core capital levels and a 	
slightly higher, though still conservative, loan to deposit ratio. 	
	
Fitch has revised the Outlook on BBVA Bancomer's international long-term IDR to 	
Negative from Stable. This reflects the inherent linkage of a subsidiary and its	
parent, as BBVA Bancomer's VR and IDRs are currently one notch above the rating 	
of its parent. These ratings might not be affected if the parent company is 	
eventually downgraded one notch further. However, the Negative Outlook reflects 	
that these ratings could be affected by a downgrade of the parent of two or more	
notches. Deterioration of the financial position of BBVA Bancomer could also 	
result in a downgrade of its VR and IDRs. Fitch has downgraded the Support 	
Rating (SR) to '2' from '1' and assigned a SRF of 'BBB-'. As the largest bank in	
its country, it is highly likely that the Mexican government (FC and LC IDR 	
'BBB'; Outlook Stable) will provide support should it should be required.	
	
Fitch has affirmed BBVA Bancomer's global junior subordinated securities at 	
'BBB-' and affirmed the plain-vanilla subordinated hybrids were affirmed at 	
'BBB'. National Ratings assigned to the bank's hybrid securities, all of them 	
being junior subordinated debt instruments, were affirmed at 'AA(mex)'. 	
Potential downgrade of BBVA Bancomer's VR and IDRs would very likely result in 	
downgrades of similar magnitude in the hybrids ratings. 	
	
The Outlook on BBVA Bancomer's national-scale ratings is Stable, which reflects 	
that the ratings could only be affected by a multi-notch downgrade of the bank's	
own VR. (This is not Fitch's baseline scenario, but it cannot be ruled out.)	
	
Casa de Bolsa BBVA Bancomer (BBVA Casa de Bolsa Mexico):	
	
Fitch has affirmed BBVA Casa de Bolsa Mexico's National Ratings. The securities 	
firm forms an integral part of BBVA Bancomer's franchise. Fitch makes no 	
distinction between the credit risk of BBVA Casa de Bolsa Mexico and BBVA 	
Bancomer.	
	
Facileasing S.A. de C.V. (Facileasing)	
	
Fitch has affirmed the National Ratings of Facileasing in Mexico, which is owned	
by BBVA. However, Fitch believes this entity is a strategic part of BBVA 	
Bancomer, and it should be viewed as part of BBVA's overall Mexican franchise. 	
Facileasing's National Ratings are equalized with those of BBVA Bancomer.	
	
Banco BBVA Continental (BBVA Continental):	
	
Fitch has downgraded BBVA Continental's long-term local currency IDR to 'BBB+' 	
from 'A-' and its short-term local currency IDR to 'F2' from 'F1'. Fitch has 	
also affirmed BBVA Continental's long-term foreign currency rating at 'BBB+'. 	
BBVA Continental's IDRs are now driven by its 'bbb+' VR, as is the IDR of its 	
parent. The Rating Outlook on BBVA Continental's long-term IDR remains Negative 	
in keeping with BBVA's Outlook, as complete isolation from the rating trends of 	
the parent is not likely. 	
	
Despite this link to its parent's ratings, the bank's VR evidences a capacity to	
withstand some deterioration of its parent and remain above BBVA's rating, 	
absent a significant deterioration of market sentiment. BBVA Continental's VR 	
reflects the bank's sound franchise, high efficiency, adequate risk management, 	
robust asset quality, ample loan loss reserves, adequate capital, wide based/ 	
low cost funding, consistent performance and high profitability within a very 	
positive economic background despite fierce local competition. 	
	
BBVA Continental's Support Rating (SR) remains at 2, and Fitch has assigned a 	
'BBB-' SRF. As the second largest bank in Peru with a market share of more than 	
20% of deposits, the Peruvian government (FC and LC IDR 'BBB' Stable Outlook) is	
highly likely to provide support should it be required.	
	
Continental Trustees (Cayman) Ltd (CTCL):	
	
Fitch has downgraded the loan participation notes issued by CTCL to 'BB+' from 	
'BBB-'. The notes are secured by the rights to a junior subordinated loan 	
extended to BBVA Continental. The notes were downgraded, mirroring the trend of 	
its anchor rating (BBVA Continental's Local Currency long-term IDR). According 	
to Fitch's criteria to rate bank capital securities, this type of securities 	
would be notched 1-2 notches from the anchor rating indicated above for 	
probability of non-performance, in addition to 1-2 notches for loss severity.	
	
Continental Senior Trustees (Cayman) Ltd (CSTC):	
	
Fitch has affirmed the rating of the loan participation notes issued by CSTC. 	
The notes are secured by the rights to a senior loan extended to BBVA 	
Continental, hence are equalized with the long-term Foreign Currency IDR of BBVA	
Continental.	
	
Continental Senior Trustees (Cayman) II Ltd (CSTCII):	
	
Fitch has affirmed the rating of the loan participation notes issued by CSTCII. 	
The notes are secured by the rights to a senior loan extended to BBVA 	
Continental, hence are equalized with the long-term Foreign Currency IDR of 	
Banco Continental.	
	
BBVA Colombia:	
	
Fitch has downgraded BBVA Colombia's Local Currency IDR to 'BBB' from 'A-' and 	
its short-term IDR to 'F-2'. Fitch has also affirmed BBVA Colombia's long-term 	
Foreign Currency IDR and Foreign Currency IDR were at 'BBB' and 'F-2', 	
respectively. The Rating Outlook on its long-term IDRs is Negative. Fitch has 	
affirmed all of BBVA Colombia's other ratings. BBVA Colombia's IDRs are driven 	
by support from BBVA. The VR considers its resilient margins, improving 	
profitability and asset quality, adequate reserves, low loan concentration, and 	
relative efficiency, as well as its lower than average capital.	
	
The Negative Outlook on BBVA Colombia's national-scale ratings reflects the same	
trend of its international IDRs.	
	
BBVA Chile and Forum:	
	
Fitch's downgrade of both BBVA Chile's and Forum's long-term national-scale 	
ratings is the result of the lower support capacity of its parent. These 	
subsidiaries remain strategic for BBVA's franchise in Chile and are recurring, 	
albeit smaller, contributors to the parent's overall profitability. The Rating 	
Outlook for BBVA Chile, was revised to Stable from Negative given the increased 	
possibility of government support it should be required; although, the current 	
financial condition of the bank in Chile remains sound. The Outlook for the 	
long-term national ratings for Forum remains Negative, in line with that 	
assigned to the Outlook for BBVA's long-term IDR, signaling that further 	
downgrades on BBVA may affect the National Ratings of its subsidiary in Chile; 	
Fitch does not expect government support may be provided to non-bank financial 	
intuitions.	
	
BBVA Panama:	
	
As BBVA Panama's National Ratings remain driven by support from BBVA, Fitch has 	
downgraded its long-term National Scale Rating to 'AA+(pan)' from 'AAA(pan)' and	
affirmed its short-term national scale rating at 'F1+(pan)'. The Rating Outlook 	
was revised to Negative to align it with BBVA's Outlook. Despite its smaller 	
size compared to other BBVA subsidiaries in the region, BBVA Panama is 	
considered to be strategic for BBVA's Latin American franchise as indicated by 	
this operations long track record in Panama.	
	
Fitch has taken the following rating actions:	
	
BBVA Bancomer	
--Foreign currency long-term IDR affirmed at 'A-'; Outlook revised to Negative 	
from Stable;	
	
--Local currency long-term IDR affirmed at 'A-'; Outlook revised to Negative 	
from Stable;	
	
--Foreign and local currency short-term IDRs affirmed at 'F1'	
	
--Viability Rating affirmed at 'a-';	
	
--Support rating downgraded to '2' from '1';	
	
--Support Rating Floor assigned at 'BBB-';	
	
--Long-term national rating affirmed at 'AAA(mex)'; Outlook Stable;	
	
--Short-term national rating affirmed at 'F1+(mex)'; 	
	
--Long-term senior unsecured global notes affirmed at 'A-';	
	
--Long-term plain vanilla subordinated notes affirmed at 'BBB'; 	
	
--Long-term junior subordinated notes affirmed at 'BBB-'; 	
	
--Long-term national-scale rating for local senior unsecured debt issues 	
affirmed at 'AAA(mex)';	
	
--Long-term national-scale rating for local issues of market linked securities 	
affirmed at 'AAA(emr)(mex)';	
	
--Long-term national-scale rating for local subordinated debt issues affirmed at	
'AA(mex)'. 	
	
Casa de Bolsa BBVA Bancomer 	
	
--Long-term national rating affirmed at 'AAA(mex)'; Outlook Stable;	
	
--Short-term national rating affirmed at 'F1+(mex)'.	
	
Facileasing, S.A. de C.V.	
	
--Long-term national rating affirmed at 'AAA(mex)'; Outlook Stable;	
	
--Short-term national rating affirmed at 'F1+(mex)'; 	
	
--Short-term senior unsecured debt affirmed at 'F1+(mex)';	
	
--Long-term senior unsecured debt affirmed at 'AAA(mex)'.	
	
BBVA Continental	
	
--Long-term foreign currency IDR affirmed at 'BBB+'; Outlook revised to Negative	
from Stable;	
	
--Long-term local currency IDR downgraded to 'BBB+' from 'A-'; Outlook Negative;	
	
--Short-term foreign currency IDR affirmed at 'F2';	
	
--Short-term local currency IDR downgraded to 'F2' from 'F1';	
	
--Support rating affirmed at '2';	
	
--Support Rating Floor assigned at 'BBB-';	
	
--Viability rating affirmed at 'bbb+'.	
	
Continental Trustees (Cayman) Ltd.	
	
--Senior secured junior subordinated loan participation notes downgraded to 	
'BB+' from 'BBB-'.	
	
Continental Senior Trustees (Cayman) Ltd 	
	
--Senior secured loan participation notes affirmed at 'BBB+'.	
	
Continental Senior Trustees II (Cayman) Ltd.	
	
--Senior secured loan participation notes affirmed at 'BBB+'.	
	
BBVA Colombia	
	
--Long-term foreign currency IDR affirmed at 'BBB'; Outlook revised to Negative 	
from Stable;	
	
--Short-term foreign currency IDR affirmed at 'F2';	
	
--Long-term Local currency IDR downgraded to 'BBB' from 'A-'; Outlook Negative; 	
	
--Short-term Local currency IDR downgraded to 'F2' from 'F1';	
	
--Viability Rating affirmed at 'bbb-'; 	
	
--Support rating affirmed at '2';	
	
--National long-term rating affirmed at 'AAA(col)'; Outlook revised to Negative 	
from Stable;	
	
--National senior unsecured debt affirmed at 'AAA(col)';	
	
--National Short-term rating affirmed at 'F1+(col)'.	
	
--National long-term subordinated debt affirmed at 'AAA(col)'.	
	
BBVA Chile	
	
--Long-term national-scale rating downgraded to 'AA-(cl)' from 'AA+(cl)'; 	
Outlook revised to Stable from Negative; 	
	
--Short-term national-scale affirmed at 'N1+(cl)';	
	
--National long-term rating on senior unsecured bonds downgraded to 'AA-(cl)' 	
from 'AA+(cl);	
	
--National long-term rating on mortgage notes downgraded to 'AA-(cl)' from 	
'AA+(cl);	
	
--National long-term rating on subordinated bonds downgraded to 'A (cl) from 	
'AA-(cl)';	
	
--National equity rating affirmed at 'Primera Clase nivel 3'.	
	
Forum Servicios Financieros	
	
--Long-term national-scale rating downgraded to 'AA-(cl)' from 'AA(cl)'; Outlook	
Negative; 	
	
--National long-term rating on senior unsecured bonds downgraded to 'AA-(cl)' 	
from 'AA(cl);	
	
--National short-term rating on commercial paper affirmed at 'F1+(cl)'.	
	
BBVA Panama	
	
--Long-term national-scale rating downgraded to 'AA+(pan)' from 'AAA(pan)'; 	
Outlook revised to Negative from Stable;	
	
--Short-term national-scale rating affirmed at 'F1+(pan)';	
	
--Long-term senior unsecured debt downgraded to 'AA+(pan) from 'AAA(pan)'.	
	
 (Caryn Trokie, New York Ratings Unit)
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