NEW YORK & SAN SALVADOR--(BUSINESS WIRE)--Fitch Ratings has affirmed Credomatic International Corporation's (CIC) long-term Issuer Default Rating (IDR) at 'BBB+' and Support Rating at '2'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
CIC's IDRs reflect the support it would receive from its parent, Banco de Bogota (Bogota, rated 'BBB+/F2' by Fitch Ratings), should it be required. Bogota's ability to support CIC is reflected in its IDR. In Fitch's opinion, the financial support to CIC would be timely and sufficient.
CIC's IDRs mirrors its parent's ratings because it is considered a key and integral part of Bogota's business, as well as for the existence of cross-default clauses in some Bogota's debt issuances. CIC's subsidiaries complement Bogota's traditional business and strategy of diversifying into retail. Additionally, some Bogota's debt issuances state that a CIC default will constitute a technical default on its obligation. In Fitch's opinion, these clauses provide strong incentives to prevent CIC's default.
CIC has a meaningful size relative to Bogota. As of December 2014, CIC represents 26.5% of Bogota's consolidated assets and 36.7% of its net income. This reflects the fundamental importance of its performance on its parent's financial results and its key contribution to the achievement of the group's strategy. Despite the size of the entity, the holding company is comprised of entities in 6 countries, which in Fitch's opinion does not carry a significant level of correlation on their operations are mostly self-sufficient and independent; being that the largest subsidiary represent just 8% of Bogota's assets.
As the holding company of BAC-Credomatic's credit card businesses and banking operations in the Central American countries, with the exception of Panama, CIC is positioned to have one of the strongest financial franchises in the region. The group is a leader in the credit card business, while having a dominant market share in the acquiring and issuing businesses.
CIC's subsidiaries exhibit a solid financial performance since they consistently rank among the most profitable banks in each country. The retail approach allows them to have a high net interest margin and generate cross-selling fee income. Credit cards issuers' subsidiaries contribute significantly to revenues. In the short term, Fitch expects CIC's subsidiaries' profitability will continue to be high and will allow them to sustain credit growth and investment objectives.
BAC-Credomatic has developed an adequate costumer deposit base in each country where it operates. This is reflected in the participation of deposits in total funding and low concentration by largest depositors. CIC's subsidiaries' ample and stable deposit base is favored by third party payroll-deductible loans and by its leadership in the credit card market, which motivated a large number of companies to have demand deposits within operations of the group. Customer deposits account for 73.2% of CIC's total funding as of March 2015, well balanced between companies and individuals.
CIC's capitalization has improved compared to its lowest level in 2013, driven by higher internal capital generation than assets growth. Fitch estimates that the increase in profitability of Guatemalan operations as well as the maintenance of good financial results in the rest of its subsidiaries, will allow CIC to achieve the 2011-2012 capital levels in the next years. On an unconsolidated basis, debt levels are relatively high (double leverage of 136%, as of March 2015) but is compensated by good debt service coverage ratios.
CIC is an exempt holding company incorporated in the British Virgin Islands and groups BAC-Credomatic's credit card businesses and commercial banking operations in each Central American country, with the exception of Panama. BAC-Credomatic is one of the largest financial groups in Central America. As of March 2015, CIC consolidates $13.2 billion in assets and is a leader in the credit card business, while having a dominant market share in the acquiring and issuing businesses.
Changes in CIC's IDR would reflect changes in Bogota's ability and/or propensity to provide support, if necessary. The IDRs would move in line with Bogota's rating.
Fitch has affirmed the following CIC ratings:
--Foreign currency long-term IDR at 'BBB+'; Outlook Stable;
--Foreign currency short-term IDR at 'F2';
--Support rating at '2'.
Additional information is available on www.fitchratings.com
Global Bank Rating Criteria (pub. 20 Mar 2015)
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