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

NEW YORK & SAN SALVADOR, El Salvador--()--Fitch Ratings has affirmed Banco Davivienda Salvadoreno, S.A.'s (Davivienda Sal) long-term Issuer Default Rating (IDR) at 'BB' following Fitch's peer review of El Salvador's largest banks. A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS - IDRS, NATIONAL RATINGS AND SUPPORT

The bank's IDRs and National ratings reflect the likelihood of support from its main shareholder, the Colombian Banco Davivienda, S.A. (Davivienda; 'bbb'/'BBB'/Outlook Stable). Fitch's opinion on the support is based on the significant reputational risk that Davivienda Sal's default would pose to its parent. Fitch views the probability of support from Davivienda as moderate, resulting in a Support rating of '3'.

Davivienda continues to foster expansion and diversification in Central America and is implementing a well-balanced business plan that would contribute to consolidate its operations abroad. Fitch expects the Central American subsidiaries to provide recurring revenues to the consolidated entity over the medium term.

KEY RATING DRIVERS - VR

The bank's VR is highly influenced by Salvadoran challenging operating environment. Sector performance remains limited by the sluggish economy and heightened competition. Fitch views the adverse operating environment as a risk to Davivienda Sal's asset quality and medium-term growth prospects.

Davivienda Sal's profitability is modest but similar to Salvadoran industry's average. The bank's net interest margin has been increasing in the last four years because the improvements in its loan portfolio's profitability are higher than the rise of funding costs. Operational efficiency consistently advances but there is still room for improvement. Sustaining a good loan portfolio quality is essential for the bank to maintain or improve its profitability.

In Fitch's view, Davivienda Sal's hefty capital base provides sufficient cushion to absorb potential credit losses despite it has been decreasing since 2013. Fitch expects capital ratios to remain comfortably in the mid-teens, sustained by low growth and a reduction in dividend payments.

Davivienda Sal's funding profile is robust, underpinned by a large and granular deposit base favored by its recognized franchise and long trajectory. In recent years, the bank has increased funding through foreign creditors. All borrowings include correspondent banks, mostly large international financial institutions, and Development Financial Institutions.

RATING SENSITIVITIES - IDRs, NATIONAL RATINGS AND SUPPORT

Davivienda Sal's IDR is capped by Salvadoran country ceiling. Movements in El Salvador's country ceiling, although unlikely at present, could lead to similar changes in Davivienda Sal's long-term IDR.

The national and support ratings are sensitive to a change in Davivienda's ability or propensity to provide support to its subsidiaries.

INVERSIONES FINANCIERAS DAVIVIENDA'S KEY RATING DRIVERS AND SENSITIVITIES - NATIONAL RATINGS

Inversiones Financieras Davivienda, S.A.'s national ratings are aligned with Davivienda Sal's national ratings as the bank represents more than 90% of total assets and earnings. Changes in Inversiones Financieras Davivienda's ratings would mirror those of Davivienda Sal.

Fitch has affirmed the following ratings:

Banco Davivienda Salvadoreno, S.A.

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

--Short-term IDR at 'B';

--Viability Rating at 'b+';

--Support at 3;

--Long-term national rating at 'AAA(slv)', Outlook Stable;

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

--Long-term national rating senior secured debt at 'AAA(slv)';

--Long-term national rating senior unsecured debt at 'AAA(slv)';

--Short-term national rating senior secured debt at 'F1+(slv)';

--Short-term national rating senior unsecured debt at 'F1+(slv)'.

Inversiones Financieras Davivienda, 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

National Scale Ratings Criteria (pub. 30 Oct 2013)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1002242

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002242

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
Rolando Martinez
Director
+503-2516-6619
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
Rolando Martinez
Director
+503-2516-6619
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