NEW YORK--(BUSINESS WIRE)--Fitch Ratings has today affirmed Banco Multiple BHD Leon S.A. (BHDL) and its related entity's BHD Leon Puesto de Bolsa, S.A. (BHDLPB) ratings. A full list of rating actions is at the end of this rating action commentary.
KEY RATING DRIVERS
BHDL - IDRS, VR, SUPPORT AND NATIONAL RATINGS
BHDL's Viability Rating (VR), or standalone creditworthiness, drives its long-term Issuer Default Ratings (IDR) and national ratings. The bank's ratings do not consider any support, resulting in a Support Rating of '5' and a Support Floor of 'NF'.
The bank's VR is highly influenced by the operating environment and asset quality. Additionally, the bank's VR reflects its resilient profitability, adequate capitalization, reserve cushion, improving funding base and strengthened franchise.
BHDL's loan quality ratios remained sound into 2014. Sustained growth and a benign economic environment backed up asset quality, with an impaired loans/gross loans ratio of 1.66% at year-end 2014 (YE14). Reserve coverage of Past Due Loans remain the highest among large- and medium-sized banks in the Dominican Republic (DR). BHDL's conservative credit risk culture, strict collection efforts and a stable economic and operating environment, should contribute in preserving good asset quality ratios in line with the bank's historical average.
BHDL's financial performance is robust, resilient and consistent. During 2014, performance was driven by sound loan growth and an ample financial margin; the last reflecting the bank's low funding cost and credit expansion into higher margin segments. A clear focus on cost control, allows BHDL to record remarkable efficiency ratios compared to the local market average.
Internal capital generation, consistent performance and a conservative dividend policy resulted in a solid capital base. The bank's Fitch core capital ratio is expected to increase by year-end from the first quarter 2015 (1Q15) levels, and should converge to around 15% as observed over the last few years. This level compares favourably with the bank's closest local pears and with the median of its group of international peers (banks with VR of 'b+/bb-' located in Latin American countries with ratings of 'B+/BB-').
BHDL's successful franchise, distribution network and reputation have allowed it to enjoy a well-diversified, stable and low-cost funding base. The bank's deposit mix remained similar after the merger process last year, with demand deposits representing about 50% of total deposits.
BHDL consolidated its position as the second-largest private-sector bank in Dominican Republic, after the merger with the former Banco Multiple Leon on July 2014. The bank's franchise is well known and strong locally, while it has positioned itself as a highly competitive entity in the corporate business segment. The bank has also successfully increased its penetration in the fastest growing and profitable retail segment, which has widened its deposit base and reduced funding costs.
The subordinated debt rating remains one notch below the bank's national IDR given its subordination to all senior creditors.
BHDLPB - NATIONAL RATINGS
BHDLPB ratings reflect the operational and financial support provided by BHDL and its sole shareholder Centro Financiero BHD Leon (CFBHDL). In Fitch's view, BHDLPB is core for CFBHDL, as it is key and integral part of its business and provide some financial products to core clients. Furthermore, a clear commercial identification of this entity with BHDL and CFBHDL, and the reputation risk at which they would be exposed in the case of eventual troubles at BHDLPB results in a high probability of direct or indirect support should it be required.
RATING SENSITIVITIES
BHDL - IDRS, VR AND NATIONAL RATINGS
Future positive changes in BHDL's ratings will depend on additional sovereign actions, if the bank sustains its current strong financial performance and adequate capitalization. They could be downgraded if the bank's capital metrics deteriorate - such as Fitch core capital to risk-weighted assets ratio below 8% - together with asset quality weakening.
BHDLPB - NATIONAL RATINGS
An upgrade in BHDL's ratings could lead to an upgrade of BHDLPB. A negative change in the capacity or propensity of CFBHDL to provide support could pressure creditworthiness.
Fitch has taken the following rating actions:
Banco Multiple BHD Leon S.A.:
--Foreign and local currency long-term IDR affirmed at 'B+', Outlook Stable;
--Foreign and local currency short term IDR affirmed at 'B';
--Viability Rating affirmed at 'b+';
--Support Rating affirmed at '5';
--Support Floor Rating affirmed at 'NF'.
--Long-term National rating affirmed at 'AA+(dom)'; Outlook Stable;
--Short-term National rating affirmed at 'F1+(dom)'
--Long-term National subordinated debt affirmed at 'AA(dom)'.
BHD Leon Puesto de Bolsa, S.A.:
--Long-term National rating affirmed at 'AA+(dom)'; Outlook Stable;
--Short-term National rating affirmed at 'F1+(dom)';
--Long-term National senior unsecured debt rating affirmed at 'AA+(dom)';
--Short-term National senior unsecured debt rating affirmed at 'F1+(dom)'.
Additional information is available on www.fitchratings.com
Applicable Criteria
Global Bank Rating Criteria (pub. 20 Mar 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501
Global Non-Bank Financial Institutions Rating Criteria (pub. 28 Apr 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865351
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=987014
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987014
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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