Fitch Affirms Banco Agricola's IDR at 'BB' Following Peer Review; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed Banco Agricola's (Agricola) long-term Issuer Default Rating (IDR) at 'BB', Support Rating (SR) at '3' and Viability Rating (VR) at 'bb-' following Fitch's peer review of El Salvador's largest banks. Agricola's Rating Outlook on the long-term IDR remains Stable. A full list of rating actions follows at the end of this press release.

AGRICOLA'S KEY RATING DRIVERS

IDRS, NATIONAL RATINGS AND SENIOR DEBT

The bank's IDRs, National and senior debt ratings reflect the high probability of support from its shareholder, Bancolombia, S.A. (Bancolombia; long-term IDR 'BBB+'/Outlook Stable), if required. In Fitch's opinion, Agricola is an important subsidiary to Bancolombia due to the meaningful and recurring share of revenues it generates and its key role in Bancolombia's regional expansion. Fitch views the probability of support from Bancolombia as moderate, resulting in a Support rating of '3'. El Salvador's country ceiling limits Agricola's IDR at 'BB,' two notches above the local currency long-term IDR of the sovereign.

The Stable Outlook reflects Fitch's expectation of no substantial changes in Agricola's risk profile in the foreseeable future.

VR

The bank's VRs reflect its dominant domestic franchise and market position, stable and granular deposit base, strong capitalization, conservative reserve coverage, sustained good asset quality and solid profitability. Fitch also recognizes Agricola's efficient management and high execution capabilities, together with its strong risk management and conservative risk appetite along economic cycles. Fitch also factors in that the bank's financial profile is sensitive to the development of the local economy and may result in negative changes in its asset quality, profitability and capitalization trends compared to its previous averages.

The challenging domestic operating environment constrains Agricola's viability rating (VR) and affects Fitch's assessment of the bank's intrinsic financial strengths. Weak economic conditions constrain credit growth, while heightened competition for deposits pressures margins. Fitch also expects further credit quality challenges with rising household leverage.

AGRICOLA SENIOR TRUST'S LOAN PARTICIPATION NOTES RATING DRIVERS

The loan under the Senior Unsecured Loan Agreement ranks pari passu in right of payment to all of Agricola's existing and future senior indebtedness, and is effectively subordinated to all of our secured indebtedness with respect to the value of the assets securing such indebtedness and to all of the existing and future liabilities of its subsidiaries. It has thus been affirmed due to the affirmation of Agricola's IDR.

AGRICOLA'S RATING SENSITIVITIES

IDRS, NATIONAL RATINGS AND SENIOR DEBT

The IDR is capped by the Country Ceiling. Movements of El Salvador's Country Ceiling, although unlikely at present, could lead to similar changes of Agricola's IDR.

VR

Upside potential in the VR is limited due to the high influence of the operating environment on the bank's ratings. Changes in Agricola's ratings should move in tandem with those of the sovereign. Although not the agency's base scenario, a sharp decrease in Agricola's profitability and capitalization levels could, in turn, pressure the VR.

SUPPORT RATING

The support rating is sensitive to a change in Bancolombia's ability or propensity to provide support to Agricola.

AGRICOLA SENIOR TRUST'S LOAN PARTICIPATION NOTES

The rating of AST's notes is in line with Agricola's IDR and is therefore sensitive to any changes in the latter.

INVERSIONES FINANCIERAS BANCO AGRICOLA'S KEY RATING DRIVERS AND RATING SENSITIVITIES

Inversiones Financieras Banco Agricola (IFBA)'s national ratings are aligned with Agricola's national ratings as the bank represents around 99% of total assets and earnings. As such, they are sensitive to changes in Agricola's ratings.

Fitch has affirmed the following ratings:

Banco Agricola S.A.

--Long-term IDR at 'BB'; Outlook Stable;

--Viability Rating at 'bb-';

--Short-term IDR at 'B';

--Support at '3';

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

--Short-term National Rating at 'F1+(slv)';

--Senior Unsecured Debt Long-term Rating at 'AAA(slv)';

--Senior Secured Debt Long-term Rating at 'AAA(slv)'.

Agricola Senior Trust:

--Loan Participation Notes at 'BB'.

Inversiones Financieras Banco Agricola S.A.

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

--Short-term National Rating at 'F1+(slv)'.

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=1002223

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002223

Endorsement Policy

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

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 Analyst
Diego Alcazar
Director
+1-212-908-0396
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Dario Sanchez
Associate Director
+503 2516 6608
or
Committee Chairperson
Theresa Paiz Fredel
Senior Director
+1-212-908-0534
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Diego Alcazar
Director
+1-212-908-0396
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Dario Sanchez
Associate Director
+503 2516 6608
or
Committee Chairperson
Theresa Paiz Fredel
Senior Director
+1-212-908-0534
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com