NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Global Bank Corporation's (GB) long-term Issuer Default Rating (IDR) at 'BBB-'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
GB's consistent strategy, good profitability and asset quality indicators, funding diversification and sound positioning within its core market support its ratings. The bank's ratings also factor in its moderate capitalization ratios and moderate loan portfolio concentration by size.
The senior unsecured notes are rated at the same level as the bank's IDR, in accordance with Fitch's criteria.
GB's operating profitability remains higher than the Panamanian banking system average. The bank's performance is driven by a continued loan growth, good operational efficiency and recurrent fees and commission-related income. GB's operating profit benefitted from a non-recurring reversal of loan provisions related to local regulatory changes for required loan loss reserves in the first half of FY15.
GB's capitalization remains moderate despite the acquisition of Progreso, Administradora Nacional de Inversiones, Fondos de Jubilaciones y Cesantia, S.A. This acquisition generated intangibles of USD18.2 million. GB received an injection of USD10 million common equity and issued subordinated debt for another USD5 million. Also, the bank had the mandatory conversion of bonds for USD10 million in December 2014. Fitch expects capitalization to continue increasing due to improvements in revenue generation, the loan portfolio's steady growth and a dividend payout ratio less than 15%.
GB's loan and investment portfolios' quality remains solid. This quality is reflected in its low level of past-due loans, charge-offs and foreclosed assets. The investment portfolio is widely diversified and consists predominantly of investment grade securities. Similar to its peers, the positive economic environment favors loan portfolio growth and low delinquencies.
GB's funding diversification is increasing while its deposit base remains stable. Deposit concentration is moderate, reflecting GB's market position. The bank's funding sources include external creditors and debt issuances in international and local markets. Liquidity remains adequate given GB's stable deposit base, longer-term funding and ample access to other funding sources.
GB is the third largest Panamanian bank by loan portfolio and fifth by deposits, in a country that is characterized by high banking competition. As of December 2014, GB had a participation of 7.6% of the banking system's gross loans and 4.6% of deposits (based on unconsolidated figures). GB also has the third largest network of service points in Panama and sixth by branches and ATMs.
Currently there is limited upside potential for GB's ratings. They may be positively influenced by further strengthening of the company's business model and franchise, which may allow the bank to preserve a sound balance between asset and funding growth, as well as by improvement in its profitability and current capital levels in a sustained manner.
GB's ratings could be downgraded in the event of a severe deterioration in asset quality or a decline in its financial performance, resulting in a sustained decrease in the bank's ratio of tangible common equity to tangible assets to below 7.5%, or a sustained decrease in the Fitch Core Capital ratio to below 9%.
A change in GB's IDR will have an impact on the senior unsecured notes rating.
Fitch has affirmed the following ratings:
--Long-term IDR at 'BBB-'; Outlook Stable;
--Short-term IDR at 'F3';
--Viability Rating at 'bbb-';
--Support Rating at '5';
--Support floor at 'NF';
--USD400 million senior unsecured notes due 2019 at 'BBB-';
--Bonos Corporativos of USD50 million at 'AAA(slv)';
--Bonos Corporativos of USD200 million at 'AAA(slv)'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (March 20, 2015);
--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 5, 2012).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Assessing and Rating Bank Subordinated and Hybrid Securities Criteria