MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has upgraded Banco de la Nacion Argentina's (Sucursal Uruguay) (BNAUY) Foreign Currency (FC) and Local Currency (LC) long-term Issuer Default Ratings (IDRs) to 'B' from 'CCC'. Simultaneously, its Support Rating (SR) has been upgraded to '4' from '5'. A full list of rating actions follows at the end of this release.
The upgrade to BNAUY's IDRs was driven by the same action on Argentina's sovereign rating. Fitch upgraded the sovereign's LC IDR and Country Ceiling to 'B' from 'CCC' on March 22, 2016 (see 'Fitch Affirms Argentina's FC IDR at 'RD'; Upgrades LC IDR to 'B'; Outlook Stable').
KEY RATING DRIVERS - IDRs
BNAUY is a branch of Banco de la Nacion Argentina (BNA) and part of the same legal entity. BNA and BNAUY are wholly owned by the government. BNAUY's IDRs reflect the high likelihood of support from the Republic of Argentina, should it be required. BNA's liabilities (including its branches abroad) are fully guaranteed by the government.
BNAUY FC IDR is above the sovereign's FC IDR of 'RD' which reflects the current default status of certain debt securities affected by a court ruling. However, in Fitch's view, Argentina's payment capacity for its LC and FC debt securities issued under Argentina's Law is rated 'B'. At the time of the Argentina's local currency upgrade, Fitch indicated the resumption of timely debt service on defaulted bonds would lead to the upgrade of the FC IDR, most likely to the level of the LC IDR. The government is moving ahead with the external debt issuance to pay for the settlement with holdout creditors.
Although the Argentina's new government is taking steps in the right direction and reducing political and regulatory intervention into the banking system, the local environment in Argentina is still characterized by ample economic imbalances and measures are only being taken gradually and, therefore, the economic recovery will likely take some time to materialize.
As a fully state-owned financial institution, deeply integrated with government strategy, BNA's and BNAUY's creditworthiness are intrinsically aligned with that of the sovereign given the explicit guarantee in place. The head office, BNA, has a leading franchise and systemic importance in Argentina. It is the largest bank in terms of loans and deposits, with international coverage through branches and representative offices in nine countries that mainly attend to domestic needs related to intraregional foreign trade supporting the commercial activity of Argentina in the region. BNAUY is the smallest bank in the country due to its narrow business focus.
BNAUY is fully integrated with the head office's strategies, corporate governance practices and risk management procedures. BNAUY operates through only one main office and its activities are reported to the International Banking area of BNA. BNAUY has modest profitability, a fairly liquid balance sheet and adequate capitalization metrics.
KEY RATING DRIVERS - SUPPORT RATING
BANUY's Support Rating of '4' considers that there are significant uncertainties as to the ability of the sovereign to provide support, given Argentina's weak credit profile, which results in limited probability of support.
RATING SENSITIVITIES - IDRS & SUPPORT RATING
BNAUY's ratings are sensitive to changes in Argentina's sovereign rating and/or willingness or ability to provide support to BNA and its branches.
Fitch has upgraded the following ratings:
--Foreign Currency Long-Term IDR to 'B' from 'CCC'; Outlook Stable;
--Local Currency Long-Term IDR to 'B' from 'CCC'; Outlook Stable;
--Support Rating to '4' from '5'.
Additional information is available on www.fitchratings.com
Global Bank Rating Criteria (pub. 20 Mar 2015)
Dodd-Frank Rating Information Disclosure Form