MONTERREY, Mexico--(BUSINESS WIRE)--Banks in Chile and Uruguay, benefiting from economic expansion, head into 2014 with a stable outlook, while Argentine banks are negative, according to a new Fitch Ratings report.
'Southern Cone banks are following diverging paths, with Chilean and Uruguayan banks enjoying an overall good condition and comfortable prospects, while the environment for Argentine banks has remained tough with some worsening potential' said Alejandro Garcia, Senior Director in Fitch's Financial Institutions Group. 'The Chilean banking system remains one of the strongest among emerging markets, while Fitch considers that Uruguayan banks are now less exposed to potential negative developments in Argentina. In turn, the operating environment for Argentine banks continues worsening, although these entities have remained financially resilient'.
For Chile, a modest economic recovery is expected. Performance will remain solid and aligned with moderate risk levels. Adequate liquidity and new regulations will strengthen capitalization. Despite predictions of slightly lower profits, Fitch believes that the industry's fundamentals will remain Stable.
All of Uruguay's private banks are subsidiaries of foreign banks that, in general, are highly rated. The system's Positive Outlook is underpinned by the continuing consolidation of the banks' overall performance, with ample liquidity and capitalization and minimal loan impairment rates. Challenges include improving profitability, increasing loans, and reducing dollarization.
Fitch's Negative Outlook for Argentina reflects concern for increasing government intervention in the financial industry and the possibility of tightened access to foreign currencies. Financial companies' good asset quality and profitability ratios could deteriorate as inflation and macroeconomic volatility rise. The Negative Outlook on both individual banks and the overall industry could trigger a downgrade in the ratings assigned to individual institutions in 2014.
For more information, a special report titled '2014 Outlook: Southern Cone Banks' is available on the Fitch Ratings web site at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2014 Outlook: Southern Cone Banks (Clear Skies for Chilean and Uruguayan Banks; Headwinds Remain for Argentine Banks)