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TEXT - Fitch affirms Mercantil, C.A. Banco Universal rating
February 6, 2013 / 5:26 PM / in 5 years

TEXT - Fitch affirms Mercantil, C.A. Banco Universal rating

(The following statement was released by the rating agency)
    Feb 6 - Fitch Ratings has affirmed Venezuela-based Mercantil, C.A. Banco
Universal's (MB) Issuer Default Rating (IDR) at 'B+' with a Negative Rating
Outlook. Additionally, Fitch affirmed the National Ratings of MB and its holding
company Mercantil Servicios Financieros (MERCANTIL). A full list of rating
actions follows at the end of this press release. 


MB's IDR is driven by its financial strength reflected in its Viability Rating 
(VR). MB's IDR ratings are at the same level as the Sovereign (foreign and local
currency IDRs 'B+'; Outlook Negative).

Fitch affirmed MB's VR and IDR ratings as the bank remains well positioned to 
deliver strong financial results, despite the high degree of government 
intervention in the banking business. In Fitch's opinion, the bank's senior 
management experience in dealing with Venezuela's inherent economic and 
operational volatility has also benefited MB's resilience to deterioration in 
its credit profile.

Fitch believes that the shareholders' willingness to provide support should it 
be required is possible, though it cannot be relied upon due to the governments 
interference with the banking system, underpinning MB's Support rating of '5'. 
Despite MB's systemic importance, its support rating of 'No Floor' (NF) reflects
Venezuela's speculative grade rating, and the government's limited willingness 
and capacity to provide support.


MB's ratings reflect its strong franchise, strong financial performance in a 
challenging environment, healthy asset quality sustained by an above-average 
risk control culture, comparably higher profitability (even when accounting for 
inflation), adequate capitalization, and low liquidity risk relative to other 
similarly rated peers. The bank's ratings are constrained by the sovereign's 
ratings and the negative effects of government intervention over the banking 
business and overall private sector activities. 

MB's VR and IDR will be negative affected if the sovereign rating is downgraded.
MB's VR is strongly linked to the creditworthiness of the sovereign, given its 
exposure to sovereign bonds, as well as economic and operational ties. A 
significant deterioration in the bank's asset quality which hinders its equity 
loss absorption capacity could also result in downward pressure on the bank's 
ratings, although not Fitch's base case scenario. 

In the event of a sovereign ratings downgrade, MB's national ratings are not 
expected to be negatively affected. In Fitch's opinion, MB's credit risk profile
will remain among the strongest relative to its local peers.


There is limited upside to the bank's support rating and support rating floor 
over the medium term given the sovereign's current ratings and Outlooks and the 
government's propensity to intervene in the banking business and overall private
sector activities. 


Geographic business diversification, financial performance improvements, solid 
loan portfolio quality, as well as adequate unconsolidated liquidity and 
capitalization ratios underpin MERCANTIL's national ratings. The holding 
company's ratings are constrained by a challenging operational environment in 
Venezuela and the USA. 

There is limited upside potential for MERCANTIL's ratings considering the 
expected challenging environment of its subsidiaries and the existence of 
regulatory limits to upstream dividends from MB. Although not Fitch's base case 
scenario, significant leverage at the holding company level and / or reductions 
of the main subsidiaries' income-generating capacity could be negative for 
MERCANTIL's national ratings.

MB was the fourth largest bank in Venezuela at Sept. 30, 2012, with almost 
11.56% of market share in terms of assets. MB is 99.9% owned by MERCANTIL, a 
holding company with major investments in Venezuela and the USA, among others.

Fitch has affirmed the following ratings:


--Long-term foreign and local currency IDRs at 'B+'; Outlook Negative;
--Short-term foreign and local currency ratings at 'B'; 
--Viability rating at 'b+';
--Support at '5';
--Support floor at 'NF'; 
--Long-term national-scale rating at 'AA+(ven)'; 
--Short-term national-scale rating at 'F1+(ven)'.

--Long-term national-scale rating at 'AA(ven)'; 
--Short-term national-scale rating at 'F1+(ven)';
--National Rating Senior Unsecured debt at 'A2' (local regulatory rating scale),
equivalent to 'AA(ven)';
--National Rating Commercial Papers debt at 'A1' (local regulatory rating 
scale), equivalent to 'F1+(ven)'.

 (Caryn Trokie, New York Ratings Unit)

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