Fitch Reviews Large Chilean Banks

martes 11 de noviembre de 2014 14:00 GYT
 

(The following statement was released by the rating agency) NEW YORK/SANTIAGO, November 11 (Fitch) Fitch Ratings has completed its review of Chile's four largest banks. As a result of the review, the Viability Ratings (VRs) and Issuer Default Ratings (IDRs) of Banco Santander Chile (BSC), Banco de Chile (BCH), Banco de Credito e Inversiones (BCI) and Banco del Estado de Chile (BEC) have been affirmed. The rating actions are summarized at the end of this press release. The banks covered in this review together represented 63.5% of total lending in Chile by Sept. 30, 2014. Their assets of between USD50.2 billion and USD39.4 billion are primarily allocated in the domestic market. For more details on each individual bank and its affiliates' rating drivers and sensitivities, please refer to the respective press releases published in conjunction with this one and the special report titled 'Peer Review: Major Chilean Banks' that will be published in the next few days. KEY RATING DRIVERS - VR, IDRs AND NATIONAL LONG-TERM RATINGS BSC BSC's IDRs and national long-term rating are driven by its VR of 'a+' and these do not factor in any extraordinary support from its parent, although it remains a strategically important subsidiary for Banco Santander. BSC's VR and IDRs reflect its market-leadership position and its strong franchise within Chile. The ratings also reflect the bank's healthy asset quality, sound core profitability, diversified funding and adequate capital position. BCH BCH's national long-term ratings reflect its importance to the Chilean economy, strong domestic franchise, track record of sound overall performance through the economic cycle, healthy asset quality, diversified funding sources and the material improving on capital base. BEC BEC's IDRs are driven by the extremely high probability of support from its owner, the State of Chile. The bank's IDRs are aligned with Chile's Sovereign foreign currency IDR ('A+'; Outlook Stable) and local currency IDR ('AA-'; Outlook Stable). BEC's VR reflects its strong liquidity and sound structural funding based on a wide solid customer base. The bank's market position places it as one of the strongest competitors in the Chilean banking system, being the third largest bank measured by loans, and the first by deposits. BEC's overall financial performance has been good in spite of high level of competition. The bank's VR is limited by its low capital base, and lower, albeit improving, asset quality ratios compared to its local and international private peers (emerging market commercial banks with VR in the 'bbb' category). The recently approved USD 450 million capital injection will restore the bank's capital adequacy ratios and ease the pressure on the bank's VR. However, as the objective of the capital increase is to expand lending to SMEs and residential mortgages, Fitch will monitor the evolution of the bank's capitalization in the medium term and considers that future earnings retention would be key for the bank to maintain its capitalization at adequate levels. BCI BCI's VR and IDRs reflect its strong domestic franchise, sound balance sheet and liquidity management, adequate capital base and credit quality, more diversified funding sources, and its stable profitability through the cycle. The rating affirmation is also based on Fitch's opinion that the announced acquisition of City National Bank (CNB) is strategically positive for BCI and that it will not deteriorate the bank's overall financial strength SUPPORT RATING AND SUPPORT RATING FLOOR Chile's ability to provide support to these banks is reflected in its Sovereign Rating ('A+/AA-') and underpins their Support and Support Rating Floor ratings. BSC and BCI BSC and BCI's Support Rating and Support Rating Floor are based on Fitch's view that the three banks are domestic systemically important financial institutions (D-SIFI). Consequently, there is an extremely high probability of external support from the Chilean sovereign for the three banks. BEC BEC is fully owned by the State of Chile and plays a strategic social role for the government as it represents an important instrument for developing credit and monetary policies and is a domestic systemically important financial institution (D-SIFI). KEY RATING DRIVERS - SENIOR UNSECURED AND SUBORDINATED DEBT The senior unsecured bonds of the four banks are rated at the same level of their IDR and national long-term rating, considering the absence of credit enhancement or subordination feature. Fitch rates the subordinated debt of Chilean banks in the national scale two notches below its national long-term issuer rating. The two notch difference considered the loss severity due to its subordinated nature (after default). In the case of BEC, Fitch used the bank's long-term national rating as an anchor rating to notch down the subordinated debt, based on the likelihood that sovereign support will remain sufficiently strong to continue factoring support into BEC's subordinated bonds with gone-concern loss-absorption feature. RATING SENSITIVITIES - VR, IDRs AND NATIONAL LONG TERM RATINGS BSC The Outlook on BSC's Long-term IDRs is Stable. Downward pressure for BSC's VR and IDRs could arise from sustained pressure on its profitability stemming from a rise in loan loss provisions or from consistently lower capitalization. More specifically, BSC's VR could be downgraded if its ROAA falls and consistently remains below 1.3%, its Fitch Core Capital to Risk Weighted Assets ratio falls and is maintained below 9%. There is limited upside potential in the near future for BSC's VR. BCH BCH's national long-term rating could be downgraded if its Fitch Core Capital ratio remains below 9% or due to a material deterioration in asset quality (NPLs rising to 3%) that reduce its loss absorption capacity, although the latter is not Fitch's base case scenario. In turn, there is no upside potential for the bank's national ratings as they are at the top of the Chilean national ratings scale. BEC The Rating Outlook for the long-term IDRs and national rating is Stable, the same as the Outlook of the sovereign ratings. Changes in the bank's IDRs, support, support rating floor and national ratings are contingent to sovereign rating actions for Chile. BEC's VR could be downgraded if the bank fails to improve its Fitch Core Capital ratio in the short term or if after the upcoming capital injection this ratio falls and consistently remains below 7% and if its loan loss reserve coverage, including voluntary loan loss reserves, falls and consistently remains below 100% of non-performing loans. Upward ratings potential for Banco Estado's VR would mainly arise from a significant and sustained improvement of its capitalization levels, with its FCC ratio improving and remaining above 9%. BCI The Rating Outlook for the long-term IDRs is Stable and there are base on BCI's Viability Rating. Downward pressure could result from a deterioration of its capital adequacy ratios, with a Fitch core capital ratio falling and remaining below 8.5%, either from a smaller than planned capital increase or from lower than expected profitability. BCI's VR could also be under pressure if operating return on assets falls and remains below 1.5% in the medium term or if any unexpected risk related to the acquisition of CNB deteriorates BCI's profitability or capital base. Upside potential currently appears limited. That said, an upgrade could take place upon continued growth coupled with a material improvement of its capital base, with greater levels of core capital according to those of banks rated VR 'a', while maintaining its sound overall performance, low risk profile and ample liquidity. RATING SENSITIVITIES -SUPPORT RATING AND SUPPORT RATING FLOOR BSC, BCI and BEC SRs and SRFs could be affected if Fitch changes its view of Chile's ability or willingness to support these banks. RATING SENSITIVITIES - SENIOR UNSECURED AND SUBORDINATED DEBT The senior and subordinated debt of the four banks would generally move together with each bank's IDR and national long-term ratings, with the subordinated debt typically remaining two notches below the bank's national long-term rating considering the loss severity due to its subordinated nature (after default). Fitch has affirmed the following ratings: Banco Santander Chile: --Foreign and local currency long-term IDRs at 'A+'; Outlook Stable; --Foreign and local currency short-term IDRs at 'F1'; --Viability ratingat 'a+'; --Support rating at '1'; --Support rating floor at 'A-'; --Long-term national rating at 'AAA(cl)'; Outlook Stable; --Short-term national rating at 'N1+(cl)'; --Senior unsecured bonds at 'A+' and national long-term rating at 'AAA(cl)'; --Mortgage Covered Bonds national long-term rating at 'AAA(cl)'; --Subordinated bonds national long-term rating at 'AA(cl)'; --National equity rating at 'Primera Clase nivel 1'. Banco de Chile: --Long-term national rating at 'AAA(cl)'; Outlook Stable; --Short-term national ratingat 'N1+(cl)'; --Senior unsecured bonds national long-term rating at 'AAA(cl)'; --Subordinated bonds national long-term rating at 'AA(cl)'; --National equity rating at 'Primera Clase nivel 1'. Banco del Estado de Chile: --Foreign currency long-term IDR at 'A+'; Outlook Stable; --Local currency long-term IDR at 'AA-'; Outlook Stable; --Foreign and local currency short-term IDRs at 'F1'; --VR at 'bbb'; --Support rating at '1'; --Support rating floor at 'A+'; --Long-term foreign currency senior unsecured bonds at 'A+'; --Long-term national rating at 'AAA(cl)'; --Short-term national rating at 'N1+(cl)'; --National long-term rating senior unsecured bonds at 'AAA(cl)'; --National long-term rating on its subordinated bonds at 'AA(cl)'. Banco de Credito e Inversiones --Foreign and local currency long-term IDRs at 'A-'; Outlook Stable; --Foreign and local currency short-term IDRs at 'F1'; --Viability Rating at 'a-'; --Support Rating at '1'; --Support Rating Floor at 'A-'; --Long-term foreign currency senior unsecured bonds at 'A-'; --Long-term national rating at 'AA+(cl)'; --Short-term national rating at 'N1+(cl)'; --National long-term rating senior unsecured bonds at 'AA+(cl)'; --National long-term rating on its subordinated bonds at 'AA-(cl)'; --National equity rating at 'Primera Clase Nivel 1'. Contact: Primary Analysts Diego Alcazar (BSC, BEC and BCI) Director +1-212-908-0396 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Abraham Martinez (BCH) Director +56-2-499-33-17 Latin America Financial Institutions Fitch Ratings Santiago, Chile Secondary Analysts Santiago Gallo (BSC, BEC and BCH) Director +56-2-499-33-20 Abraham Martinez (BCI) Director +56-2-499-33-17 Committee Chairperson Rene Medrano Senior Director +503 2516-6610 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 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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