Fitch Ratings has affirmed Banco Latinoamericano de Comercio
Exterior's (Bladex) Long-Term Foreign Currency Issuer Default
Rating (IDR) at 'BBB+' and Viability Rating (VR) at 'bbb+',
respectively. The Rating Outlook is Stable. A full list of rating
actions is at the end of this release.
Given the soft phase of the economic cycle that some countries
in which Bladex operates are going through at present, Fitch
expects some cyclical deterioration in asset quality and
potentially earnings in the short term. However, Fitch believes
that the bank can absorb this deterioration without dramatically
altering its financial profile, thus supporting a Stable Rating
Outlook.
KEY RATING DRIVERS
IDRS, VR, NATIONAL RATINGS AND SENIOR DEBT
Sound risk management and asset quality highly influence
Bladex's ratings. Bladex's robust management of balance sheet risks
in its region of operation over time has underpinned its solid
asset quality ratios and resulted in minimal losses since its
inception.
Bladex's loan quality is strong relative to similarly rated
peers (wholesale commercial banks in 'bbb' operating environments).
Impaired loans/gross loans have been consistently below 1% for past
five years, while reserve coverage of gross loans averaged 1.3%
since 2012. Fitch expects non-performing loans (NPLs) to be higher
than previous years, given struggling economic conditions in some
of Bladex's key markets. In the medium term, Fitch's base case
scenario considers an NPL ratio not higher than 1% of gross
loans.
Bladex had about 13% of its assets in bank deposits and highly
liquid securities at end-March 2016. Its loan portfolio is very
liquid, rolling over at least twice a year. This proved a key
safeguard for the bank as it successfully navigated severe
liquidity crunches. Deposits come mostly from central, state-owned
and commercial banks and are quite stable. Bladex's balance sheet
is well matched, with limited asset/liability gaps.
Bladex's FCC ratio is sound and likely to remain in the
mid-teens, a level Fitch considers adequate, even with some balance
sheet concentration. This view considers Bladex's low-risk
business, solid and stable asset quality indicators, as well as
comparatively conservative risk management policies.
The bank's narrow margins and low-risk investment strategy limit
its profitability. However, Bladex's performance has historically
been sound and resilient. In 2015, profitability ratios were stable
and driven by resilient margins, as well as controlled credit and
operating costs. Margins increased moderately, as they were
underpinned by a decline in funding costs and an increase in
interest revenues.
Given its customer base (major regional banks and corporations),
the bank is structurally concentrated in its loan portfolio. By the
same token, funding, mainly from central/state-owned and commercial
banks, is also concentrated but fairly stable. Such concentration
could limit future upgrades of the bank's ratings.
With its expertise and franchise, Bladex is the top foreign
trade bank in Latin America. This expertise is a key competitive
factor in a region where trade consistently expands.
The bank's senior debt national rating in Mexican scale is based
on its creditworthiness, reflected in Bladex's IDR of 'BBB+'.
SUPPORT RATING AND SUPPORT RATING FLOOR
The bank's Support Rating and Support Rating Floor reflect
Fitch's view that external support for the bank, though possible,
cannot be relied upon.
RATING SENSITIVITIES
IDRS, VR, NATIONAL RATINGS AND SENIOR DEBT
Significantly weaker margins or important asset quality
deterioration that erodes profitability and weakens the bank's
capital or reserves cushion beyond Fitch's base case scenarios (FCC
below 12%) could pressure Bladex's ratings downward.
Though not likely over the rating horizon given the bank's
business profile, Bladex's international ratings could benefit from
a material reduction in credit and funding concentrations as this
could result in lower risk.
SUPPORT RATING AND SUPPORT RATING FLOOR
As Panama is a dollarized country with no lender of last resort,
a change in Bladex's SR and SRF is unlikely.
Fitch has affirmed the following ratings:
Bladex
--Long-Term Foreign Currency IDR at 'BBB+'; Outlook Stable;
--Short-Term Foreign Currency IDR at 'F2';
--Viability Rating at 'bbb+';
--Support Rating at '5';
--Support Rating Floor at 'NF';
--Senior unsecured notes at 'BBB+';
--Senior unsecured certificates at 'AAA(mex)'.
Additional information is available on www.fitchratings.com
Applicable Criteria
Global Bank Rating Criteria (pub. 15 Jul 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884135
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1009441
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009441
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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Fitch RatingsPrimary AnalystTheresa Paiz-FredelSenior
Director+1-212-908-0534Fitch Ratings, Inc.33 Whitehall StreetNew
York, NY 10004orSecondary AnalystLarisa
ArteagaDirector+1-809-563-2481orCommittee ChairpersonAlejandro
GarciaManaging Director+1-212-908-9137orMedia Relations:Elizabeth
Fogerty, New York, +1 212-908-0526Email:
elizabeth.fogerty@fitchratings.com