SAN SALVADOR, El Salvador & NEW YORK--(BUSINESS WIRE)--Fitch Ratings has today Affirmed Banco Internacional de Costa Rica's (BICSA) Issuer Default Rating (IDR) at 'BB+'. The Bank's Viability Rating (VR) and National Ratings in Panama were also affirmed. A full list of rating actions is at the end of this rating action commentary.
KEY RATING DRIVERS - IDRS, NATIONAL RATINGS AND SENIOR DEBT
The bank's IDRs, National and senior debt ratings reflect the support it would receive from its main shareholder, Banco de Costa Rica (BCR, rated 'BB+' with a Stable Outlook by Fitch), should it be required. The ratings of the bonds issued correspond to BISCA's international rating of 'BB+'.
BICSA is considered by Fitch to be a core operation for BCR. Originally created as a vehicle to extend the operations of the state-owned banks outside Costa Rica, BICSA has been successful growing its loan portfolio outside Costa Rica and Panama with sound asset quality and adequate profitability. Its contribution to the consolidated business complements its parent's strong market position in Costa Rica. Fitch believes support would be forthcoming to control reputational risk for the parent.
The bank's IDR and long-term National rating have a Stable Outlook in line with those of its main shareholder, BCR.
RATING SENSITIVITIES - IDRS, NATIONAL RATINGS AND SENIOR DEBT
The bank's IDRs, National and senior debt ratings are sensitive to a change in Fitch's assumptions as to BCR's capacity or willingness to support BICSA.
KEY RATING DRIVERS - VR
BICSA's VR reflects the bank?s consistent asset quality, stable profitability, improvements in funding diversification and adequate capital position. BICSA's VR also factors in the higher concentration risks that arise from its corporate nature. The bank?s individual creditor concentration has been gradually controlled by further diversification of the loan portfolio by country and economic sector. The bank?s deposit concentration is offset by its increased use of bank loans and issuances.
The bank?s impaired loans/total loans ratio has been less than 1% over the past 5 years and restructured loans and loans rated under the highest risk categories according to local regulation remain under control. The bank's reserve coverage is considered adequate.
The bank's record of higher liquidity levels and adequate asset-liability management partly offset its higher deposit concentration. Also, the increased use of longer term bank loans and local debt issuances improves its asset liability management and reduces mismatches.
BICSA's return on assets and equity at the end of 2012 were consistent with its historical averages. During this fiscal period, important losses were recorded regarding derivative instruments, and additional reserves were constituted due to the country's risk profile. Such losses were compensated and did not have a significant impact on the bank's capital position. At end 2012, internal capital generation of 11.2% was below asset growth of 25%, but sufficient to maintain Fitch Core Capital ratio in line with the emerging markets median of 12.5% of its 'bb-' and 'bb' rated peers.
Fitch estimates that earnings for 2013 may be affected by losses related to derivatives. Nevertheless, the estimated value disclosed for unrealized gains is conservative and likely to reduce and result in a lower realized loss. On the other hand, control issues are being addressed by the board and Fitch will monitor improvements in this area.
RATING SENSITIVITIES - VR
The bank's VRs are sensitive to a change in Fitch's assumptions regarding profitability, asset quality deterioration, or a decline in the bank's capital position. On the other hand, a significant increase in diversification of loans and funding sources could also improve the bank's VR in the long run.
Fitch affirmed BICSA's ratings as follows:
International ratings
--Long-term IDR at 'BB+'; Outlook Stable;
--Short-term IDR at 'B';
--Viability Rating at 'bb';
--Support Rating at '3';
National ratings
--Long-term national rating at 'AA-(pan)'; Outlook Stable;
--Short-term national rating at 'F1+(pan)';
--Long-term senior unsecured bonds at 'AA-(pan)';
--Commercial Paper at 'F1+(pan)'.
Additional information is available at 'www.fitchratings.com'.
Applicable criteria, "Global Financial Institutions Rating Criteria" dated 15 August 2012 and "Rating FI Subsidiaries and Holding Companies" dated 10 August 2012 are available at www.fitchratings.com.
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
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=792003
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