Fitch Revises Outlooks on Financial Institutions Following Sovereign Rating Action on Costa Rica

NEW YORK--()--Fitch Ratings has revised to Negative from Stable the Rating Outlooks of the long-term Issuer Default Ratings (IDRs) of the following four Costa Rican banks and one Panamanian subsidiary, following the revision in Costa Rica's Outlook to Negative from Stable:

--Banco BAC San Jose, S.A. (BAC San Jose);

--Banco de Costa Rica (BCR);

--Banco Internacional de Costa Rica (BICSA);

--Banco Nacional de Costa Rica (BNCR);

--Banco Popular y de Desarrollo Comunal (BPDC).

Fitch has affirmed the long- and short-term foreign and local currency IDRs, Viability Ratings (VR), and Support Ratings (SR) of these issuers. These rating actions follow Fitch's recent revision of Costa Rica's Outlook to Negative from Stable (see 'Fitch Revises Costa Rica's Outlook to Negative; Affirms IDRs at 'BB+'', published Jan. 22, 2015).

The ratings of BNCR and BCR are aligned with the sovereign due to their 100% government ownership and explicit sovereign guarantees. BICSA's ratings, in turn, are aligned with the ratings of BCR, its parent. The Outlook revision of BPDC and BAC San Jose reflect the sovereign's high level of influence over the financial sector and the broader operating environment. A Negative Outlook indicates that the IDRs of these banks would be downgraded in the event of a Costa Rican Sovereign downgrade. Conversely, a revision of the sovereign's IDR Outlook to Stable would likely prompt a similar action on the banks' IDR Outlooks.

As stated in Fitch's rating criteria, banks are rarely rated above the sovereign rating given the high influence of the operating environment over banks' performance. As such, a downgrade of Costa Rica's sovereign rating will very likely trigger a downgrade of the banks' VRs included in this review. In Fitch's view, further deterioration of the operating environment may result in pressures in the financial profile for banks in Costa Rica, which is a relevant factor that underpins the VRs of those banks.

The revision in Costa Rica's Outlook to Negative from Stable has no impact on the National Ratings of BAC San Jose, BCR, BNCR, BPDC, Banco Credito Agricola de Cartago (Bancredito) and Mutual Cartago de Ahorro y Credito (Mucap) as the relative strengths and weaknesses of each bank remain unchanged. The National Ratings in Costa Rica of these institutions were affirmed with Stable Outlook, indicating these ratings are unlikely to be downgraded should Costa Rica's sovereign be downgraded. On the other hand, National Ratings of BPDC and BICSA's issuance programs in El Salvador, as well as BPDC's issuance in Panama, are very likely to be downgraded due to local relativities in those countries, in the event of a reduction on BPDC and BICSA's IDR and VR. In turn, the long-term Outlook of the National Ratings in Panama of BICSA was revised to Negative from Stable. A full list of rating actions follows at the end of this press release.

BAC San Jose

KEY RATING DRIVERS - IDR, VR, SR and National Ratings

BAC San Jose's IDRs and National Ratings reflect the support it would receive from its parent, Banco de Bogota ('BBB+/F2'), should it be required. Banco de Bogota's ability to support BAC San Jose is reflected in its IDR. As part of BAC/Credomatic group, BAC San Jose is considered as a 'core' subsidiary to its parent, based on its meaningful size, its important contribution to consolidated net income and its key role in Banco de Bogota's regional strategy. The bank's SR of '2' reflects Banco de Bogota's high probability to provide support to BAC San Jose, if required.

The VR reflects BAC San Jose's high performance and income diversification, solid asset quality, as well as an adequate capital levels considering the bank's risks and growth expectations. The VR also considers the bank's high dollarization and sovereign risk exposure.

RATING SENSITIVITIES - IDR, VR, SR and National Ratings

BAC San Jose's IDRs would be downgraded should Costa Rica's sovereign rating and country ceiling be downgraded. In addition, the IDRs and national ratings could change if Fitch's assessment of Banco de Bogota's ability or willingness to support its subsidiaries changes. BAC San Jose's VR would be downgraded should Costa Rica's sovereign rating be downgraded, due to its high exposure to sovereign risk. Also, should asset quality deteriorate or capital ratio (Fitch Core Capital/Risk Weighted Assets) decline below to 11% its VR would be pressured downwards.

BCR, BNCR, and Bancredito

KEY RATING DRIVERS - IDRs, VR, SR, Support Rating Floor (SRF), Senior Debt, and National Ratings

BCR, BNCR, and Bancredito are fully owned by the Costa Rican government and benefit from explicit sovereign guarantees contained in Costa Rica's Banking Law. BNCR and BCR's international long- and short-term ratings are aligned with Costa Rica's sovereign Ratings and thus their IDRs' Outlooks were revised to Negative from Stable, accordingly.

BCR's VR mainly reflects its adequate loss absorption capacity -reflected in acceptable capital position and modest reserves coverage for non-performing loans, and its weaker operating environment. The bank's VR also considers its manageable asset quality and modest profitability.

The key rating drivers with the highest influence on BNCR's VR are its moderate risk appetite and adequate, although decreasing capitalization metrics, as well as its weaker operating environment. The rating also considers its strong local franchise, ample funding as well as its modest performance and weaker asset quality metrics relative to similarly rated international peers.

BCR's and BNCR's SR of '3' reflects Fitch's opinion that there is a moderate probability of support from the state. In Fitch's opinion, the bank has a clear policy roll and the explicit support of the state. Support probability is limited by the sovereign rating. The banks' SRF are equalized to the sovereign rating, given the explicit guarantee from the government towards the bank and its systemic importance.

In turn, the National ratings for the three state-owned banks were affirmed with stable Outlook, as the banks preserve their relative strength within the Costa Rican market.

RATING SENSITIVITIES - IDRs, VR, SR, Support Rating Floor (SRF), Senior Debt, and National Ratings

Changes in Costa Rica's sovereign rating may trigger similar changes in BCR and BNCR's IDRs, VR, SR, SRF, and senior debt ratings. National ratings of the three state-owned banks are less likely to be affected should Costa Rica's IDRs are downgraded.

BICSA

KEY RATING DRIVERS - IDR, VR, SR and National Ratings

BICSA's IDRs, National and senior debt ratings were affirmed reflecting the support that the bank may receive from its main shareholder, BCR, should it be required. Fitch believes that support would be forthcoming if needed as in Fitch's view it is considered a core subsidiary for its parent.

The affirmation of the bank's SR considers Fitch's view that the moderate probability of support remains unchanged. The revision of the Outlook of the bank's IDR and national rating to Negative from Stable follows similar revision on BCR's IDRs and reflects the potential direction of BCR's support capacity. BICSA's VR was affirmed reflecting its stable and sound asset quality, moderate profitability, stable funding and adequate capitalization.

RATING SENSITIVITIES - IDR, VR, SR and National Ratings

BICSA's Negative Outlook on the IDR and national ratings reflects that a downgrade on BCR's IDRs will be reflected in a similar action on BICSA's IDR and national ratings. The revision of the Outlook of BCR's IDRs to Stable from Negative will be likely reflected in a similar revision in BICSA's IDR and National Long-Term rating. The bank's VR is sensitive to a change in profitability, asset quality and capital position.

BPDC

KEY RATING DRIVERS - IDRs, VR, SR, SRF, National Ratings

BPDC's IDRs, VR and national ratings reflect its stand-alone credit worthiness which includes a robust loss absorption capacity, stable deposit base, good profitability ratios and adequate asset quality. The bank's ratings also reflect the moderate tenure mismatches in its asset and liability structure.

The bank's SR of '3' and SRF of 'BB' indicates that in Fitch's view there is a moderate probability of support from the Costa Rican Government despite having no explicit guarantee, given the nature of the bank and its systemic importance.

RATING SENSITIVITIES - IDRs, VR, SR, SRF, National Ratings

A downgrade of the BPDC's VR -- and consequently of its IDRs -- could also be triggered by a reduction in the sovereign rating, reflecting the increased risks of a deteriorated operating environment. Also, a significant deterioration of the bank's profitability and asset quality would place downward pressure on the bank's VR, IDRs and national ratings.

BPDC's support SR and SRF are sensitive to changes in the sovereign rating. In case the Costa Rican Sovereign Rating is downgraded, the SR and SRF of the bank would also be downgraded.

MUCAP

KEY RATING DRIVERS - National Ratings

Mucap's ratings consider its inherent credit profile, which includes a good asset quality, moderate profitability and tight capital position. The ratings also factors in the sizeable share of funds (84% of the total to September 2014) explicitly guaranteed by the Costa Rican State. The issuances ratings are driven by the explicit sovereign guarantees as stated in Costa Rica's Banking Law.

RATING SENSITIVITIES - National Ratings

A downgrade on Mucap's national ratings could be triggered by a sustained reduction on its capital ratio (Fitch Core Capital/Risk Weighted Assets below to 10%). Fitch's sensitivity does not currently anticipate developments with a high likelihood of leading to a positive rating change. However, a strengthening of the company's financial profile, which increases the bank's capitalization and profitability, could be positive for the ratings. The issuance ratings, which are support driven, are less likely to be affected should Costa Rica's IDRs be downgraded as its relative strength within the Costa Rican market would remain unchanged.

Fitch has affirmed the following ratings:

Banco BAC San Jose

International Ratings

--Long-term IDR at 'BBB-'; Outlook revised to Negative from Stable;

--Short-term IDR at 'F3';

--Local currency long-term IDR at 'BBB'; Outlook revised to Negative from Stable;

--Local currency short-term IDR at 'F3';

--Support rating at '2';

--Viability rating at 'bb+'.

National Ratings

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

--Short-term National Rating a 'F1+(cri)';

--Long-term senior unsecured debt at 'AAA(cri)';

--Short-term senior unsecured debt at 'F1+(cri)'.

Banco de Costa Rica

International ratings

--Long-term IDR at 'BB+', Outlook revised to Negative from Stable;

--Short-term IDR at 'B';

--Long-term local currency IDR at 'BB+', Outlook revised to Negative from Stable;

--Short-term local currency IDR at 'B';

--Long-term senior unsecured bonds at 'BB+';

--Viability Rating at 'bb+';

--Support Rating at '3';

--Support Rating Floor at 'BB+'.

National ratings:

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

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

--Long-term senior unsecured bonds at 'AA+(cri)';

--Commercial paper at 'F1+(cri)'.

Banco Internacional de Costa Rica

International ratings

--Long-term IDR at 'BB+'; Outlook revised to Negative from Stable;

--Short-term IDR at 'B';

--Viability Rating at 'bb';

--Support Rating at '3'.

National ratings

--Long-term National rating at 'AA-(pan)'; Outlook revised to Negative from Stable;

--Short-term National rating at 'F1+(pan)';

--Long-term senior unsecured bonds at 'AA-(pan)';

--Commercial Paper at 'F1+(pan)'

- Long-Term senior unsecured bonds at 'AA+(slv)'; Outlook revised to Negative from Stable;.

Banco Nacional de Costa Rica

International ratings

--Long-term IDR at 'BB+', Outlook revised to Negative from Stable;

--Short-term IDR at 'B';

--Long-term local currency IDR at 'BB+', Outlook revised to Negative from Stable;

--Short-term local currency IDR at 'B';

--Long-term senior unsecured bonds at 'BB+';

--Viability Rating at 'bb+';

--Support Rating at '3';

--Support Rating Floor at 'BB+'.

National ratings:

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

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

--Long-term senior unsecured bonds at 'AA+(cri)';

--Commercial paper at 'F1+(cri)'.

Banco Popular y de Desarrollo Comunal

International ratings:

--Long-term IDR at 'BB+', Outlook revised to Negative from Stable;

--Short-term IDR at 'B';

--Long-term local currency IDR at 'BB+', Outlook revised to Negative from Stable;

--Short-term local currency IDR at 'B';

--Viability Rating at 'bb+';

--Support Rating at '3';

--Support Rating Floor at 'BB'.

National ratings:

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

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

--Long-term senior unsecured bonds at 'AA+(cri)';

--Commercial paper at 'F1+(cri)'.

--Long-term senior unsecured bonds in Panama at 'AA-(pan)';

--Commercial paper in Panama at 'F1+(pan)'.

--Long-term senior unsecured bonds in El Salvador at 'AA+(slv)'; assigned Outlook Negative;

--Commercial paper in El Salvador at 'F1+(slv)'.

Mutual Cartago de Ahorro y Prestamo

National ratings:

--Long-term national rating at 'A(cri)', Outlook Stable;

--Short-term national rating at 'F1(cri)';

--Long-term senior secured bonds at 'AA+(cri)';

Banco Credito Agricola de Cartago

National ratings:

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

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

--Long-term senior secured bonds at 'AA+(cri)';

--Commercial paper at 'F1+(cri)'.

Additional information is available on www.fitchratings.com

Applicable Criteria and Related Research:

--Fitch Revises Costa Rica's Outlook to Negative; Affirms IDRs at 'BB+'' (Jan. 22, 2015);

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

--'National Scale Ratings Criteria' (Oct. 30, 2014);

-- Assessing and Rating Bank Subordinated and Hybrid Securities Criteria (Jan. 31, 2014), applies only for BCR and BNCR.

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

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=978773

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 Analysts
Diego Alcazar (BAC San Jose)
Director
+1 212-908-0396
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Mark Narron (BCR, BNCR, BICSA, BPDC)
Director
+1-212-612-7898
or
Luis Guerrero (MUCAP, Bancredito)
Associate Director
+503 2516 6618
or
Secondary Analysts
Edgar Cartagena (BICSA)
Director
+503 2516 6613
or
Marcela Galicia (BCR, BNCR)
Director
+503 2516 6616
or
Mario Hernandez (BPDC)
Associate Director
+503 2516 6614
or
Rolando Martinez (BAC San Jose)
Director
+503-2516-6619
or
Committee Chairperson
Theresa Paiz Fredel
Senior Director
+1 212-908-0534
or
Media Relations, New York
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analysts
Diego Alcazar (BAC San Jose)
Director
+1 212-908-0396
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Mark Narron (BCR, BNCR, BICSA, BPDC)
Director
+1-212-612-7898
or
Luis Guerrero (MUCAP, Bancredito)
Associate Director
+503 2516 6618
or
Secondary Analysts
Edgar Cartagena (BICSA)
Director
+503 2516 6613
or
Marcela Galicia (BCR, BNCR)
Director
+503 2516 6616
or
Mario Hernandez (BPDC)
Associate Director
+503 2516 6614
or
Rolando Martinez (BAC San Jose)
Director
+503-2516-6619
or
Committee Chairperson
Theresa Paiz Fredel
Senior Director
+1 212-908-0534
or
Media Relations, New York
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com