Fitch Affirms and Withdraws Santander Bancorp's Ratings

NEW YORK--()--Fitch Ratings has affirmed and withdrawn the ratings for Santander Bancorp (SBP) and its subsidiaries at 'BBB' and Viability Rating (VR) at 'bb+'. Fitch has withdrawn the ratings as SBP has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide ratings or analytical coverage for SBP. A full list of ratings follows at the end of this release.

Fitch notes that there has been no material change in SBP's credit risk profile since the bank's ratings were affirmed at the Puerto Rico Bank Peer committee in December 2013.

KEY RATING DRIVERS - VRS, IDRS AND SENIOR DEBT

SBP's IDRs are correlated with Banco Santander's; therefore, changes in Banco Santander's IDRs and/or Outlook result in changes to SBP's. SBP's IDRs would also be affected should Fitch's view of support change.

Fitch has affirmed SBP's standalone 'BBB' rating and VR at 'bb+'. The affirmation is supported by the company's sound operating performance and solid capital position while operating in the challenging Puerto Rico market. Similarly to local peers, asset quality remains a challenge.

Through the credit downturn, SBP's standalone performance has been better than peers as evidenced by above-average profitability, capital and credit measures. Despite the headwinds from the weak local economy, SBP's results have held up well. More recently, the company has experienced a decline in profitability measures, although they are still in-line with current ratings level.

Given continued profitability, the company's capital position has remained solid with a TCE ratio at 14.47% and Fitch Core Capital/Risk Weighted Assets of 23.08% for 4Q'13.

SBP's loan portfolio exhibits better credit performance due to more conservative underwriting and overall risk management practices (including a relatively low concentration in construction lending and commercial real estate). Nonetheless, Fitch is concerned with SBP's elevated levels of NPAs at 5.7%, although it compares well to local peers with an average NPA of 10.8% at 4Q'13.

SBP is the third largest bank in Puerto Rico by deposits with approximately a 12% share. SBP offers banking and other financial services through its subsidiaries, Banco Santander Puerto Rico, Santander Financial Services, Santander Securities Corporation among other smaller subsidiaries. Since 2010, SBP is wholly owned by Banco Santander (in Spain).

KEY RATING SENSITIVITIES -VR, IDRS AND SENIOR DEBT

Rating sensitivities are no longer relevant given today's rating withdrawal.

KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by SBP, and its subsidiaries are all notched from SBP's Long-term 'BBB' IDR Rating, which is tied to its parent company, Banco Santander. In Fitch's view, the parent would continue to support the obligations of SBP, its wholly-owned subsidiary.

Fitch notes that SBP does not have any preferred stock outstanding as of May, 21, 2014.

RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Rating sensitivities are no longer relevant given today's rating withdrawal.

KEY RATING DRIVERS - SUPPORT RATING

The Support Rating is '2', which reflects Fitch's view that there is still a high probability of support for SBP by its parent in the event of need.

Fitch considers SBP to be strategically important to, but not a core subsidiary of, Banco Santander. This is reflected in the support-driven IDR, which is notched one notch below the parent company's IDRs at 'BBB'. Since SBP's support reflects institutional support, no support rating floor is assigned.

RATING SENSITIVITIES - SUPPORT RATING

Rating sensitivities are no longer relevant given today's rating withdrawal.

KEY RATING DRIVERS - HOLDING COMPANY

SBP's IDR and VR are equalized with those of Banco Santander Puerto Rico, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries.

RATING SENSITIVITIES - HOLDING COMPANY

Rating sensitivities are no longer relevant given today's rating withdrawal.

KEY RATING DRIVERS - SUBSIDIARY AND AFFILIATED COMPANY

Banco Santander Puerto Rico is a wholly owned subsidiary of Santander Bancorp. Banco Santander Puerto Rico's ratings are aligned with SBP reflecting Fitch's view that the bank subsidiary is core to the franchise.

RATING SENSITIVITIES - SUBSIDIARY AND AFFILIATED COMPANY

Rating sensitivities are no longer relevant given today's rating withdrawal.

KEY RATING DRIVERS - LONG- AND SHORT-TERM DEPOSITS

Banco Santander Puerto Rico's long- and short-term deposit ratings reflect Fitch's view of how these deposits would be treated in a liquidation by the FDIC.

RATING SENSITIVITIES - LONG AND SHORT TERM DEPOSITS

Rating sensitivities are no longer relevant given today's rating withdrawal.

Fitch has affirmed and withdrawn the following ratings:

Santander Bancorp

--Long-term IDR at 'BBB'; Outlook Stable;

--Short-term IDR at 'F2';

--Viability Rating at 'bb+';

--Support Rating at '2';

--Subordinated debt at 'BBB-'.

Banco Santander Puerto Rico

--Long-term IDR at 'BBB'; Outlook Stable;

--Short-term IDR at 'F2';

--Viability Rating at 'bb+';

--Support Rating at '2';

--Long-term deposit rating at 'BBB+';

--Short-term deposit rating at 'F2'.

Santander PR Capital Trust I

--Preferred stock at 'BB'.

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=831215

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
Doriana Gamboa
Director
+1 212-908-0865
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Jaymin Berg
Director
+1 212-908-0368
or
Committee Chairperson
Christopher Wolfe
Managing Director
+1 212-908-0771
or
Media Relations, New York
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Doriana Gamboa
Director
+1 212-908-0865
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Jaymin Berg
Director
+1 212-908-0368
or
Committee Chairperson
Christopher Wolfe
Managing Director
+1 212-908-0771
or
Media Relations, New York
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com