Fitch: Most South American Banking Sector Outlooks Remain Negative at Mid-Year

CARACAS, Venezuela--()--Banking sector outlooks remain negative for Argentina, Brazil, Ecuador and Venezuela at mid-year, with positive sector outlooks only in Costa Rica and Uruguay, according to a new Fitch Ratings report.

"The negative sector outlook for Ecuador, Argentina and Venezuela reflects concern that weaker economies and increasing government intervention could hinder real credit expansion and the banks' operations," said Larisa Arteaga, Director, Latin American Financial Institutions. In the case of Brazil, the main driver was lackluster economic performance and recent fast loan growth of Brazilian federal-owned banks.

According to Fitch, the positive sector outlooks for Uruguay and Costa Rica were based on the expected positive effects of a benign economic environment for 2014.

Nominal loan growth in Venezuela continued to accelerate due to high inflation, but macroeconomic imbalances have contributed to a recession this year, which could negatively affect loan quality. While a weak economy continues to decrease Brazilian banks' appetite for unsecured credit expansion, banks in Argentina and Ecuador face new regulatory conditions that may limit financial sector activity.

Performance metrics for banking systems with negative sector outlooks are likely to deteriorate mostly due either to government price fixing, limits on fees and commissions, or higher credit costs.

Except for Venezuela, all banking systems with negative sector outlooks have limitations in terms of capital generation capacity due to lower profitability.

Liquidity is adequate in all systems. However, the investment portfolios' high exposure to weak sovereigns place Venezuelan, and to a lesser extent Argentinean banks, at a disadvantage compared to peers.

For more information, a special report titled 'Sector Outlooks: An Update' is available on the Fitch Ratings web site at www.fitchratings.com, or by clicking on the link.

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

Applicable Criteria and Related Research: Sector Outlooks: An Update (Argentina, Brazil, Costa Rica, Ecuador, Uruguay and Venezuela)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=762088

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
Larisa Arteaga
Director
Avenida Francisco de Miranda Edificio Mene Grande II Piso 2
Oficina 23, Urbanizacion Los Palos Grandes
Caracas, ZP 1062, VENEZUELA
+1 809 563-2481
or
Robert Stoll
Director
+1 212 908-9155
or
Marcela Galicia
Director
+503 2516 6616
or
Alejandro Tapia
Director
+52 81 8399 9514
or
Monica Ibarra
Director
+52 81 8399 9100
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Larisa Arteaga
Director
Avenida Francisco de Miranda Edificio Mene Grande II Piso 2
Oficina 23, Urbanizacion Los Palos Grandes
Caracas, ZP 1062, VENEZUELA
+1 809 563-2481
or
Robert Stoll
Director
+1 212 908-9155
or
Marcela Galicia
Director
+503 2516 6616
or
Alejandro Tapia
Director
+52 81 8399 9514
or
Monica Ibarra
Director
+52 81 8399 9100
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com