NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Multibank's (MB) long-term Issuer Default Rating (IDR) at 'BB+'. The Rating Outlook is Stable. Fitch has also affirmed the bank's national ratings. A full list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
MB's Viability Rating (VR) and IDRs reflect its coherent strategy, consistent performance, sound asset quality, and adequate reserves and capital. The ratings also factor in the bank's improved funding mix and adequate liquidity. Fitch's view of MB's ratings is tempered by the challenges faced by the bank to improve its competitive position and enhance its profitability metrics in a highly competitive market.
MB consolidated its corporate strategy and overhauled its commercial strategy to position itself as a relevant contender in the middle market and retail segments in Panama. MB has steadily expanded its network, heightened its profile and improved its franchise as the bank increased its market share to 3.5% of general licenced banks' total unconsolidated assets by end-2012.
Resilient margins and growing loan volumes coupled with moderate credit costs allowed MB to post moderate but consistent profitability ratios. MB will need further income diversification and cost control to face competition and rising interest rates.
Sound credit origination, adequate remedial management, and a positive economic backdrop underpinned asset quality that remained under control (90-day past due loans around 1%) and is consistently well covered by reserves. In addition, concentration on both sides of the balance sheet is moderate after years of continuous improvement.
The overhauled commercial strategy helped widen the deposit base while changed the deposit mix and lowered funding costs. MB's liquidity remains sound and is supplemented by adequate contingency plans. However, the increase of longer-tenor loans creates the need to further diversify funding to prevent undesired asset/liability gaps in a highly competitive market that could create pressures to become more aggressive in credit or pricing.
RATING SENSITIVITIES
Consistent progress on MB's profitability and capital ratios (i.e., Fitch Core Capital approaching 13%) could lead to positive rating actions. In addition, MB's ratings could be improved over the medium term if the bank continues to increase its market share and diversify its revenues while maintaining low concentrations on both sides of the balance sheet and adequate asset quality.
MB's ratings could be negatively affected by an unexpected sharp deterioration in asset quality that affects performance and erodes its capital/reserve cushion. Additionally, excessive growth that overstretches the bank's capital (i.e., Fitch Core Capital below 10%) could also be negative. Furthermore, an extension of the average tenor of its loans without a corresponding extension of its liability maturity profile would be a rating negative.
Fitch has affirmed MB's ratings as follows:
--Long-term IDR at 'BB+'; Outlook Stable;
--Short-term IDR at 'B';
--Viability Rating at 'bb+';
--Support Rating at '5';
--Support Rating Floor at 'NF';
--National scale long-term rating at 'AA-(pan)'; Outlook Stable;
--National scale short-term rating at 'F1+(pan)'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012)
--Evaluating Corporate Governance' (Dec. 12, 2012)
--'National Ratings Criteria' (Jan. 19, 2011)
--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 5, 2012).
Applicable Criteria and Related Research
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
Evaluating Corporate Governance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=694649
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Assessing and Rating Bank Subordinated and Hybrid Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=790846
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