Fitch Affirms Banco Davivienda Salvadoreno's IDR at 'BB+'; Outlook Remains Negative

NEW YORK & SAN SALVADOR, El Salvador--()--Fitch Ratings has today affirmed Banco Davivienda Salvadoreno's (Davivienda Sal) long-term Issuer Default Rating at 'BB+'. The Rating Outlook is Negative. A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS - IDRs AND NATIONAL RATINGS

The IDRs and national ratings of Davivienda Sal reflect the Fitch's opinion on likelihood of support from its main shareholder, the Colombian Banco Davivienda, S.A. (Davivienda; 'BBB-'/Stable Outlook/'bbb-').

Fitch views Davivienda Sal and IFDavivienda as strategically important to its parent (based on Fitch's criteria 'Rating FI Subsidiaries and Holding Companies'). Davivienda continues to foster expansion and diversification in Central America and is implementing a well-balanced business plan that would contribute to the consolidated operation. Fitch expects the subsidiaries to provide recurring and meaningful revenues to the consolidated entity over the medium term. Support would be forthcoming to protect against reputational risk from the shared franchise and commercial name.

KEY RATING DRIVERS - VR

Davivienda Sal's viability rating (VR) is driven by its moderate domestic franchise, solid capital position and adequate asset quality ratios. The bank's ratings also reflect weak efficiency levels, modest profitability and limited income diversification.

Asset quality ratios have significantly improved since 2009, and now compare adequately with other similarly rated banks. Over due loans (> 90 days)) accounted for 3% of gross loans in end-2013 (2009 to 2012: 5%). Davivienda Sal's reserves for nonperforming loans (NPLs) remains below full coverage, although collateral coverage (mainly real estate) is comfortably above the stock of NPLs.

Profitability remains modest but is recovering from a low base. Continuous improvements in efficiency, combined with diminishing loan impairment charges and higher recoveries of previously written off loans, have benefitted the bank's financial performance. Fitch believes that Davivienda Sal's profitability will remain below potential in 2014, as a result of slow economic growth and heightening competition.

In Fitch's view, the bank has a sound loan-loss absorption capacity, with a Fitch Core Capital (FCC) ratio of 17% at end-2013. This, along with moderate reserves, helps cushion losses in a difficult economic environment. Capital ratios should remain comfortably in the mid-to-high teens sustained by an adequate internal capital generation and good asset quality.

RATING SENSITIVITIES - IDRs AND VR

Davivienda Sal's Negative Outlook reflects that an eventual downgrade of El Salvador's sovereign rating ('BB-'/Negative Outlook) could result in a downgrade of the country ceiling, which would, in turn, lead to a downgrade of Davivienda Sal's VR and IDR. Hence, if the sovereign ratings are eventually affirmed at 'BB-' and the Outlook is revised to Stable from Negative, it is highly likely that Davivienda Sal's Ratings and Outlook would be revised accordingly. Davivienda Sal's VR is constrained by the El Salvador' sovereign Rating given that the bank has no track record of outperforming the market.

RATING SENSITIVITIES - NATIONAL RATING

National ratings are sensitive to a change in Fitch's opinion on the parent's capacity and/or propensity to support its subsidiaries.

Fitch has affirmed the following ratings:

Banco Davivienda Salvadoreno

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

--Short-term IDR at 'B';

--Viability Rating at 'bb-';

--Support at 3;

--Long-term national rating at 'AA+(slv)', Outlook Stable;

--Short-term national rating at 'F1+(slv)';

--Long-term national rating senior secured debt at 'AAA(slv)';

--Long-term national rating senior unsecured debt at 'AA+(slv)';

--Short-term national rating senior secured debt at 'F1+(slv)';

--Short-term national rating senior unsecured debt at 'F1+(slv)'.

Inversiones Financieras Davivienda

--Long-term national rating at 'AA+(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);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

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

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=827785

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, Inc.
Primary Analyst
Diego Alcazar, +1-212-908-0396
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Dario Sanchez, +503 2516-6608
Associate Director
Edificio Plaza Cristal, Tercer Nivel,
79 Ave. Sur y Calle Cuscatlan
San Salvador, El Salvador.
or
Marcela Galicia, +503 2516-6616
Director
or
Committee Chairperson
Franklin Santarelli, +1-212-908-0739
Managing Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com

Sharing

Contacts

Fitch Ratings, Inc.
Primary Analyst
Diego Alcazar, +1-212-908-0396
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Dario Sanchez, +503 2516-6608
Associate Director
Edificio Plaza Cristal, Tercer Nivel,
79 Ave. Sur y Calle Cuscatlan
San Salvador, El Salvador.
or
Marcela Galicia, +503 2516-6616
Director
or
Committee Chairperson
Franklin Santarelli, +1-212-908-0739
Managing Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com