Fitch Affirms Banco BAC San Jose's IDR at 'BBB-'; Outlook Negative

NEW YORK & SAN SALVADOR, El Salvador--()--Fitch Ratings has affirmed Banco BAC San Jose, S.A.'s (BAC San Jose) 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

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. The bank's SR of '2' reflects Banco de Bogota's high probability to provide support to BAC San Jose, if required.

The Negative Outlook reflects the sovereign's high level of influence over the financial sector and the broader operating environment and indicate that the IDRs of this bank 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 bank's IDR Outlooks.

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. 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 bank's VR.

BAC San Jose is the main bank of BAC-Credomatic group. The bank accounts for 24.5% of its consolidated assets and 21.7% of its net income, as of March 2015. BAC-Credomatic group integrates banks, credit card issuers and financial services providers in the Central American region and enjoys a highly recognized franchise in the region due to its leadership position in the consumer loan, credit card businesses and regional treasury management.

BAC San Jose is one of the most profitable banks in Costa Rica. The bank's results stand out for its income diversification, outstanding operating efficiency and controlled loan loss provisions.

Similar to other private bank in Costa Rica, a large portion of BAC San Jose's operations are denominated in USD. As of June 2015, 65.6% of its assets and 62% of its liabilities are in USD. This factor, result in a net interest income lower than banking system average and high net income sensitive by the accounting effect of exchange rate differentials. Nevertheless, the entity open currency position avoids a negative impact on its capital rations resultant from exchange rate devaluation.

The bank has good underwriting-standards, surveillance and collection processes. These factors in addition to a well balance loan portfolio by economic sector and lending segments, as well as a low concentration by borrowers, reduce the bank's credit risk exposure. Impaired loan ratios remain low, but write-offs have increased.

In Fitch's opinion, BAC San Jose's capital and liquidity levels are adequate. The bank accomplishes the liquidity policies of BAC-Credomatic group and has a stable and broad depositary base. Although it has a short-term funding, the bank has a sound access to funding. In addition, deposits tend to be stable as some of them are associated with another financial services provided by the bank.

PROFILE

BAC San Jose is the largest private bank in Costa Rica and competes for the third place in the national banking system. As of June 2015, its market share is 12.4% in terms of gross loans and 11.4% in terms of deposits. Its strong local franchise is reflected particularly in credit cards, mortgages, consumer loans and payroll payments.

RATING SENSITIVITIES

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.

Fitch has affirmed BAC San Jose's ratings as follows:

International Ratings

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

--Short-term IDR at 'F3';

--Local currency long-term IDR at 'BBB'; Outlook Negative;

--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)';

--Programa de Bonos BSJ-2011 Colones at 'AAA(cri)';

--Programa de Bonos BSJ-2011 Dolares at 'AAA(cri)';

--Programa de Papel Comercial BSJ-2011 Colones at 'F1+(cri)';

--Programa de Papel Comercial BSJ-2011 Dolares at 'F1+(cri)'.

Also, Fitch has assigned new ratings as follows:

--Programa de Bonos BSJ-2015 Colones at 'AAA(cri)';

--Programa de Bonos BSJ-2015 Dolares at 'AAA(cri)';

--Programa de Papel Comercial BSJ-2015 Colones at 'F1+(cri)';

--Programa de Papel Comercial BSJ-2015 Dolares at 'F1+(cri)'.

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990482

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990482

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Diego Alcazar
Director
+1-212-908-0396
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Rolando Martinez
Director
+503-2516-6619
or
Committee Chairperson
Alejandro Garcia
Senior Director
+52 (81) 8399-9146
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Diego Alcazar
Director
+1-212-908-0396
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Rolando Martinez
Director
+503-2516-6619
or
Committee Chairperson
Alejandro Garcia
Senior Director
+52 (81) 8399-9146
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com