Fitch Affirms Three Major Argentine Private Banks at 'B-'; Outlook Negative

MONTERREY, Mexico--()--Fitch Ratings has affirmed the international ratings of three major Argentine private banks: Banco Macro (Macro), Banco Santander Rio (Santander Rio), and BBVA Banco Frances (BBVA Frances).

Fitch affirmed at 'b-' and 'B-', respectively, the banks' Viability Ratings (VR) and Long Term Local Currency Issuer Default Ratings (LT LC IDR). The Rating Outlook on the LT LC IDRs remains Negative.

Fitch has also affirmed the ratings on Macro's senior unsecured and subordinated debt at 'B-'/RR4 and 'CCC'/RR6, respectively.

A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The banks' VRs and IDRs are currently constrained by the weak and deteriorating operating environment in Argentina, characterized by ample economic imbalances, and the risk of increasing political or regulatory intervention on the banking system. These banks have maintained sound financial profiles, but the potential of increased sovereign risk cannot be underestimated.

The Negative Outlook on each bank's LC LT IDR is in line with that of Argentina's sovereign Rating Outlook, which is Negative.

All of the banks have support ratings (SR) of '5', and Macro additionally has a support rating floor (SRF) of 'NF'. This reflects that, although possible, external support for these banks cannot be relied upon, given the high political interference risk and ample economic imbalances. Fitch considers that Santander Rio and BBVA Frances are subsidiaries of limited importance for their respective parents, Spain's Banco Santander, S.A. (SAN) and Banco Bilbao Vizcaya Argentaria (BBVA), both rated 'BBB+' with a Stable Outlook by Fitch.

Macro - VR and debt issues

Macro's ratings factor in the bank's sound and stable franchise, strong and resilient earnings, well-controlled asset quality, high loss absorption capacity, as well as its stable funding and good liquidity.

Macro's senior unsecured debt rating is aligned to the bank's LT LC IDR, given Fitch's perception that these notes would have average recoveries in the event of liquidation. In turn, the 'CCC/RR6' rating of the subordinated notes due 2036 reflects that these notes are subordinated to all of Macro's senior debt and therefore carry low recovery prospects. However, the rating of the notes also consider the high compression arising from the low VR of the issuer, and Fitch's opinion that non-performance risk is low, despite the non-cumulative coupon deferrable feature, considering Macro's ample capital cushion relative to regulatory minimums and its current and expected earning generation.

Santander Rio - VR

Santander Rio's VR benefits from the ample experience of its main shareholder, Spain's SAN, as well as by its stable and growing franchise as one of the two largest private banks. The bank is going through a solid expansion, with positive loans and deposits trends, adequate asset quality, profitability, and sound capitalization.

BBVA Frances - VR

BBVA Frances' VR benefits from the ample experience of its main shareholder, Spain's BBVA, as well as from its stable and growing franchise as one of the four largest private banks. The bank's VR also reflects its healthy asset quality, sound and improved profitability, as well as its strong capital adequacy.

RATING SENSITIVITIES

Any downgrade of Argentina's sovereign rating could trigger further downgrades in the banking sector, including the VRs and IDRs of these three banks, and Macro's senior unsecured and subordinated debt.

In turn, if the magnitude of the economic downturn is greater than expected, Macro's VR and IDRs could be affected by material financial deterioration. Impairments above 5% or operating ROA below 2% could trigger a downgrade of these ratings.

Santander Rio's and BBVA Frances' ratings could be pressured downward in the event of considerably weaker asset quality or profitability metrics, or a tightened liquidity position, although Fitch considers this is unlikely in the near term.

Fitch does not expect any improvement in bank ratings in the near term, unless the sovereign rating dynamics changes positively. Due to the current compression on the rating of its subordinated notes, a potential upgrade of Macro's VR will not necessarily result in a similar action on the 'CCC/RR6' rating of these notes.

Changes on the SRs and SRFs of these banks are highly unlikely in the foreseeable future.

Fitch has affirmed the ratings as follows:

Macro

--FC and LC long-term IDRs at 'B-', Outlook Negative;

--FC and LC short-term IDRs at 'B';

--Viability Rating at 'b-';

--Support at '5';

--Support Floor at 'NF';

--USD150 million Senior bonds Class 2 due 2017 at 'B-/RR4';

--USD150 million subordinated debt due 2036 at 'CCC/RR6'.

Santander Rio

--Viability Rating at 'b-';

--LT LC IDR at 'B-', Outlook Negative;

--Support at '5'.

BBVA Frances

--Viability Rating at 'b-';

--LT LC IDR at 'B-', Outlook Negative;

--Support at '5'.

Additional information is available on www.fitchratings.com

Applicable Criteria and Related Research:

--'Global Financial Institutions Criteria', Jan. 31, 2014;

--'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria', Jan. 31, 2014.

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=824359

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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst:
Alejandro Garcia, CFA, +52 81 8399 9146
Senior Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst:
Monica Ibarra, +52 81 8399 9150
Director
or
Committee Chairperson:
Franklin Santarelli, +1-212-908-0739
Managing Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst:
Alejandro Garcia, CFA, +52 81 8399 9146
Senior Director
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst:
Monica Ibarra, +52 81 8399 9150
Director
or
Committee Chairperson:
Franklin Santarelli, +1-212-908-0739
Managing Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com