OREANDA-NEWS. Fitch Ratings has today affirmed Mutlibank Inc.'s (MB) Long-term Issuer Default Rating (IDR) at 'BBB-' and Viability Rating (VR) at 'bbb-' following Fitch's peer review of Panama's mid-sized banks. Fitch has also affirmed MB's national long-term rating at 'AA'(pan). The Rating Outlook on MB's IDR and national long-term rating remains Stable. A full list of rating actions is at the end of this press release.

KEY RATING DRIVERS
IDRS, VR, NATIONAL RATINGS AND SENIOR DEBT
The bank's VR drives its IDRs and National scale ratings and reflects MB's universal banking franchise, its adequate but pressured capitalization, and its consistent profitability and robust asset quality. The national rating assigned to MB's locally issued USD 100 million Class A corporate notes are aligned with MB's national long-term rating.

The bank successfully executed a long-term strategy, adopted since 2005, to expand its retail services, diversify its revenue generation and become a universal bank with regional reach. The bank's international expansion to Colombia, Costa Rica and Peru is still in early stages but has been well executed to date. The Colombian bank subsidiary, which acquired a banking license in 2015, has not yet reached break-even, but its performance is in line with management expectations and does not materially impact its parent.

Notwithstanding solid internal capital generation and a tapering rate of asset growth, MB's capital position came under pressure in 2015. Fitch Core Capital declined to 9.4% of risk weighted assets at December 2015 from 10.6% at December 2014. However, the bank's common shareholders intend to provide a capital injection in 2016 (in keeping with a strong track record of ordinary shareholder support) for an expected Fitch Core Capital indicator exceeding 10% by year-end 2016.

The decline in the Fitch Core Capital ratio in 2015 stemmed from a $26.5 million unrealized revaluation loss on MB's available for sale securities. The portfolio, which consists of high quality securities and is positioned for liquidity over gain, recovered significantly in early 2016. However, the 2015 loss follows on a similar revaluation event in 2013. The bank is in the process of adjusting its investment policies, hedging longer-term maturities and reducing sensitivity to market movements.

MB's loan quality is a key strength. Loans past due by 90 days remained stable at 0.8% at Dec 2015, compared to the banking system average of 1.1%. The bank's reserve coverage is more than adequate, representing 147% of non-performing loans, not including reserves in the capital account. MB maintains a diversified portfolio with minor levels of concentration and related party lending.

The bank's profitability ratios are robust and stable despite high competition and a declining interest rate environment. The bank's ROAA improved moderately to 1.4% in 2015, from 1.3% in 2014, thanks in part to much improved operational efficiency. Fitch expects margins may come under further pressure across the industry due to high levels of competition and market penetration but will not materially impact MB and larger franchises.

SUPPORT RATING AND SUPPORT RATING FLOOR
The bank's Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'NF' reflect Fitch's expectation of no support. As a longstanding dollarized economy, Panama lacks a lender of last resort, though Banco Nacional de Panama, the largest state controlled bank, could provide temporary liquidity loans.

RATING SENSITIVITIES
VR, IDRS, NATIONAL RATINGS AND SENIOR DEBT
Currently there is limited upside potential for MB's ratings. Further strengthening of its business model and franchise as well as a sustained improvement in capitalization may positively influence its ratings.

MB's ratings could be downgraded in the event of a severe deterioration in asset quality or further decline in its financial performance, resulting in a sustained decrease in the Fitch Core Capital ratio, subsequent to its expected 2016 capital injection, below 10%.

The national ratings of MB's unsecured senior notes are sensitive to a change in MB's ratings.

Fitch has taken the following rating actions:

Multibank, Inc.
--Long-term IDR at 'BBB-'; Outlook Stable;
--National long-term rating at 'AA'; Outlook Stable;
--National short-term rating at 'F1+';
--Short-term IDR at 'F3';
--Viability Rating at 'bbb-';
--Support Rating at '5';
--Support floor at 'NF';
--USD 100 million Class A Corporate Notes at 'AA(pan)'.