NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Banco de los Trabajadores' (Bantrab) Long-Term Issuer Default Rating (IDR) at 'BB-' following Fitch's peer review of Guatemala's largest banks. The Rating Outlook is Stable. A full list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
BANTRAB'S KEY RATING DRIVERS - IDRs, VR, SUPPORT, SUPPORT RATING FLOOR, AND NATIONAL RATINGS
Bantrab's Long-Term IDR and national ratings are driven by its intrinsic creditworthiness, as reflected in its Viability Rating (VR). Bantrab's VR is highly influenced by the Guatemalan operating environment and its high risk appetite. The rating also factors in the bank's strong profitability, good asset quality, franchise and retail-focused business model, as well as its concentration in the public sector and good equity position.
Bantrab's Support Rating and Support Rating Floor of '5' and 'NF', respectively, indicate that, although possible, external support cannot be relied upon, given the current low state ownership and limited systemic importance.
Bantrab is characterized by its high risk appetite, focusing on segments of middle and low income, particularly in the Guatemalan public sector. Its risk controls, particularly the debt collection via automatic payroll deductions and collection policies are keys for mitigating the inherent credit risk in its target segments. Meanwhile, the investment portfolio is concentrated on debt issuers with Guatemalan sovereign guarantee.
Bantrab's profitability indicators are solid and exceed the average of the Guatemalan banking system. This is based on a high net interest margin, acceptable operational efficiency and moderate loan loss provisions. Fitch anticipates the operating return on risk-weighted assets will be between 3.6% and 4%, while the operating return on equity will exceed 26%.
The bank's loan portfolio quality is good, particularly for one that is focused on risky segments. The delinquency-over-90-days rate shows an increase because of changes in their write-off policies, but the net effect of such debts plus net charge-offs shows a net improvement compared to its recent history. Also, the loan-loss coverage ratio has increased and is now aligned with the industry average.
The bank's capital position compares favourably with its recent history and the industry average. Its Fitch Core Capital is 15.6% and provides an adequate loan loss absorption capacity, better than other major banks in the industry. In Fitch's view, an adequate level of capitalization is essential, given the risks associated with the strategic plan of the bank.
Its business model, focused on the riskier segments of retail banking, is benefitted by automatic payroll deductions which yield strong competitive advantages over the competition. Fitch believes that a diversification of its model could benefit the bank significantly but notes the limited track history in these areas. Fitch does not anticipate material changes in the foreseeable future, given the bank's business model which is focused on traditional financial intermediation.
BANTRAB SENIOR TRUST'S LOAN PARTICIPATION NOTES' KEY RATING DRIVERS
Bantrab Senior Trust's (BST) seven-year USD loan participation notes rating is in line with Bantrab's VR reflecting that the senior unsecured obligations rank equally with the bank's unsecured and unsubordinated obligations.
RATING SENSITIVITIES
BANTRAB'S RATING SENSITIVITIES - IDRs, VR AND NATIONAL RATINGS
Fitch believes that the probability of a positive rating action in the medium term is limited. However, in the long run, ratings could increase if there were a higher revenue diversification, while maintain a good asset quality.
Although it is not Fitch's base scenario, a ratings downgrade could occur if a substantial deterioration in loan portfolio quality caused a negative impact on operating profitability and the material weakening of the bank's capital position.
BANTRAB SENIOR TRUST'S LOAN PARTICIPATION NOTES' RATINGS SENSITIVITIES
Changes in the notes' rating are contingent on rating actions for Bantrab.
Fitch has affirmed the following ratings:
Banco de los Trabajadores
--Long-term foreign currency IDR at 'BB-'; Outlook Stable;
--Short-term foreign currency IDR at 'B';
--Long-term local currency IDR at 'BB-'; Outlook Stable;
--Short-term local currency IDR at 'B';
--Viability rating at 'bb-';
--Support at '5';
--Support Rating Floor at 'NF';
--Long-term national rating at 'A(gtm)', Outlook Stable;
--Short-term national rating at 'F1(gtm)'.
Financiera de los Trabajadores
--Long-term national rating at 'A(gtm)', Outlook Stable;
--Short-term national rating at 'F1(gtm)'.
Bantrab Senior Trust
--Long-term foreign currency loan participation notes at 'BB-'.
Additional information is available on www.fitchratings.com
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
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=1004485
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004485
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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