Fitch Affirms Banco Agricola's IDR at 'BB+'

NEW YORK & SAN SALVADOR, El Salvador--()--Fitch Ratings has affirmed Banco Agricola's (Agricola) long-term Issuer Default Rating (IDR) at 'BB+' and Viability Rating (VR) at 'bb+'. The Rating Outlook on the long-term IDR remains Negative. A full list rating actions follows at the end of this press release.

KEY RATING DRIVERS

Agricola's IDR is driven by its VR, which reflects the bank's strong franchise and dominant local position, sound and stable profitability, robust loss-absorption capacity, good asset quality, and ample depositary base. Agricola's ratings also consider the bank's proven resilience to downturns in economic cycles, loans concentrations and El Salvador's challenging economic conditions, which may still have some impact on the bank's growth prospects and asset quality.

Agricola's IDR is currently constrained by the Country Ceiling and, together with its VR, remains two notches above El Salvador's Sovereign Rating. Fitch believes there is a close link between bank and sovereign credit risk (and therefore ratings), and it is exceptional for banks to be rated above their domestic sovereign. Notably, in the absence of a strong stand alone performance, Agricola's IDRs would remain at the same level given the support it would receive from its parent, Bancolombia (rated 'BBB' by Fitch), should it be required. This is reflected on Agricola's support rating of '3', indicating a moderate probability of support.

Agricola continues exhibiting a robust capital position reflected in a Fitch Core Capital around 20% of risk weighted assets over the past four fiscal years; it has compared well above the banking system's average and that of its main international peers. In Fitch's view, Agricola's overall loss-absorption capacity will remain sound and above that of its peers over the medium term. Agricola's strong overall financial performance in different phases of the business cycle have been driven by its stable and relatively low credit-risk costs, outstanding operating efficiency and low funding costs.

Agricola's good asset quality compares positively with that of some of its main international peers and with the local banking system. The bank reached the lowest NPLs level since 2008 while maintains a conservative reserve coverage policy. The good asset quality is driven by its conservative underwriting standards, payrolls deductions for a share of retail loans, permanent charge-off policy and good collection procedures. However, larger debtors' concentration is relatively high given its exposure in the largest domestic economic groups. The bank's funding and liquidity base remain stable, with low depositors concentrations. The bank's ability to access and sustain an ample, stable, low-cost and diversified customer deposits base constitutes one of the bank's main strength. Agricola maintains a good liquidity position, as cash and equivalents accounted for 22.1% of total deposits.

Agricola's support of '3' denotes that Fitch views the bank as a core subsidiary for Bancolombia, as defined by Fitch's Criteria 'Rating FI Subsidiaries and Holding Companies'. Agricola provides a meaningful and recurring share of revenues to its parent and is an important subsidiary for Bancolombia's growth and diversification in Central America. Recent expansion of Bancolombia into other Central American markets bode well to enhance the relative importance of its international network in the medium and long term.

RATING SENSITIVITIES - IDR, VR and National Ratings -

The Negative Outlook for Agricola's IDR reflects that an eventual downgrade of El Salvador's sovereign rating ('BB-'/Negative Outlook) could result in a downgrade of the country ceiling ('BB+'). This would, in turn, lead to a downgrade of Agricola's IDRs and VR. If the sovereign ratings are eventually affirmed at 'BB-' and the Rating Outlook is revised to Stable from Negative, it is highly likely that Agricola's IDR would also be affirmed with a Stable Outlook. A sharp decrease in Agricola's profitability and capitalization levels could, in turn, move the bank's VR downward. Agricola's national ratings would not be affected should El Salvador's sovereign and country ceiling be downgraded as its relative strength in the local market remains unchanged. Inversiones Financieras Banco Agricola (IFBA)'s national ratings mirror Agricola's national ratings and its changes, as the last represents around 99% of total assets and earnings.

Fitch has affirmed the following ratings:

Banco Agricola S.A.

--Long-term IDR at 'BB+'; Outlook Negative;

--VR at 'bb+';

--Short-term IDR at 'B';

--Support at '3';

--Long-term National Rating at 'AAA(slv)'; Outlook Stable;

--Short-term National Rating at 'F1+(slv)';

--Senior Unsecured Debt Long-term Rating at 'AAA(slv)';

--Senior Secured Debt Long-term Rating at 'AAA(slv)'.

Inversiones Financieras Banco Agricola S.A.

--Long-term National Rating at 'AAA(slv)'; Outlook Stable;

--Short-term National Rating at 'F1+(slv)'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

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

--'National Ratings Criteria' (Oct. 30, 2013);

--'Rating Financial Institutions Above the Sovereign' (Dec. 12, 2012);

--'El Salvador' (July 16, 2013).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

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

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Rating Financial Institutions Above the Sovereign

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696373

El Salvador

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=713539

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827766

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Contacts

Fitch Ratings
Primary Analyst
Diego Alcazar, +1 212-908-0396
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Edgar Cartagena, +503 2516 6613
Director
or
Rene Medrano, +503 2516 6610
Senior Director
or
Francesca Cedrola (Lead Analyst for IFBA), +503 2516 6611
Analyst
or
Committee Chairperson
Franklin Santarelli, +1 212-908-0739
Managing Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Diego Alcazar, +1 212-908-0396
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Edgar Cartagena, +503 2516 6613
Director
or
Rene Medrano, +503 2516 6610
Senior Director
or
Francesca Cedrola (Lead Analyst for IFBA), +503 2516 6611
Analyst
or
Committee Chairperson
Franklin Santarelli, +1 212-908-0739
Managing Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com