Fitch Revises Banco Popular Dominicano and Related Entity's Outlook to Stable; Affirms Ratings

NEW YORK--()--Fitch Ratings has affirmed the ratings and revised the Outlook of Banco Popular Dominicano's (BPD), and its related entity Popular Bank Ltd. Inc y Subsidiaria (Popular Bank). The rating Outlook has been revised to Stable from Positive on the long-term national rating (LTNR). A full list of rating actions follows at the end of this press release.

RATING ACTION RATIONALE

The Outlook revision to Stable from Positive on BPD's LTNR is driven by a recent change in outlook of the Dominican Republic sovereign IDRs, and Fitch's expectations that the current and expected challenges in the Dominican operating environment could limit improvements on the bank's financial performance.

BPD's LTNRs are driven by its strong franchise within the Dominican financial system, conservative risk culture, adequate asset quality and profitability. BPD's pressured efficiency ratios, public sector exposure, and low capitalization levels which compare unfavorable to local peers are also incorporated in its LTNRs.

NATIONAL RATING DRIVERS AND SENSITIVITIES

An upgrade scenario for BPD's LTNR is limited unless there is a positive change in the sovereign rating. Downward pressure on the bank's LTNR would be derived from additional deterioration on the bank's overall capitalization that hinders its loss absorption capacity; not the base case scenario at the moment.

SUBORDINATED DEBT

BPD's long-term national subordinated debt rating in the Dominican Republic is one notch below its long-term national rating due to its subordination with respect to the bank's privileged liabilities of first and second degree. According to Fitch's criteria, BPD's subordinated debts have no equity credit, although they are considered Tier II capital by local regulation.

RELATED ENTITY RATING DRIVERS AND SENSITIVITIES

BPD and Popular Bank's LTNR are at the same level, as Fitch considers the related entity as core operations to its sole shareholder Grupo Popular (GP) and BPD. This LTNR alignment reflects the high probability of direct or indirect support that will be provided by BPD and GP in a hypothetical case should it be required. A change on BPD's credit risk profile will similarly affect the LTNR of Popular Bank.

BPD is the second largest commercial bank in the Dominican Republic, with a 23.36% market share of total system assets as of October 2012. BPD is the main subsidiary of GP, a financial holding, with investments in Dominican Republic, Panama and in the United States of America.

Fitch has affirmed the ratings and revised the Outlooks for the following:

Banco Popular Dominicano (Popular)

--Long-term national rating at 'AA-(dom)'; Outlook to Stable from Positive;

--Short-term national rating at 'F1+(dom)';

--National rating subordinated debt at 'A+ (dom)'.

Popular Bank Ltd. Inc y Subsidiaria (Popular Bank)

--Long-term national rating at 'AA-(dom)'; Outlook to Stable from Positive;

--Short-term national rating at 'F1+(dom)';

--Long-term national rating at 'BB+(pan)'; Outlook to Stable from Positive;

--Short-term national rating at 'B(pan)'.

Additional information is available at 'www.fitchratings.com' and 'www.fitchdominicana.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Fitch Revises Outlook on Dominican Republic to Stable; Affirms IDRs at 'B'' (Dec. 11, 2012);

--'2013 Outlook: Central America and the Dominican Republic' (Dec. 13, 2012).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

2013 Outlook: Central America and the Dominican Republic

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696486

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. 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.

Contacts

Fitch Ratings
Primary Analyst (BPD)
Theresa Paiz-Fredel, +1-212-908-0534
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Primary Analyst (Popular Bank)
Pedro El Khaouli, +58-212-286-3844
Senior Director
Fitch Venezuela, Sociedad Calificadora de Riesgo, S.A.
Ave. Fco. De Miranda, Edif. Mene Grande II, Ofic. 23,
Caracas, Venezuela
or
Committee Chairperson
Alejandro Garcia, +1-52-81-8335-7179
Senior Director
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst (BPD)
Theresa Paiz-Fredel, +1-212-908-0534
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Primary Analyst (Popular Bank)
Pedro El Khaouli, +58-212-286-3844
Senior Director
Fitch Venezuela, Sociedad Calificadora de Riesgo, S.A.
Ave. Fco. De Miranda, Edif. Mene Grande II, Ofic. 23,
Caracas, Venezuela
or
Committee Chairperson
Alejandro Garcia, +1-52-81-8335-7179
Senior Director
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com