OREANDA-NEWS. (This is a correction of a release published July 18, 2016. It updates the referenced criteria to include Fitch's 'Global Bank Rating Criteria - Effective from 20 March 2015 to 15 July 2016.')

Fitch Ratings has affirmed Banco Davivienda S. A.'s (Davivienda) Long-Term Issuer Default Rating (IDR) at 'BBB' and Grupo Bolivar S. A.'s (GB) National Ratings at 'AAA(col)'. The Rating Outlook is Stable. See the full list of rating actions at the end of this release.

The affirmation of Davivienda's ratings reflects the bank's resilient and stable financial performance.

KEY RATING DRIVERS

VIABILITY RATING (VR), IDRS, NATIONAL RATINGS AND SENIOR DEBT

Davivienda's Long-Term Local and Foreign Currency IDRs are driven by its VR of 'bbb'. The bank's VR is highly influenced by its capitalization metrics and operating environment. Davivienda's ratings also consider its consistent performance, solid asset quality and risk management and its clear long-term strategy and adequate execution of that strategy.

Significant currency depreciation in 2015 increased the proportion of USD-denominated assets, though capital remained mainly denominated in local currency. Nevertheless, sustained growth supported profitability, which, combined with a conservative dividend payout policy improved the bank's capital position.

The impact of the introduction of IFRS accounting standards and significant peso depreciation of around 32% in 2015 was limited for Davivienda compared to other large Colombian banks. Davivienda's Fitch Core Capital (FCC) to Risk Weighted Assets (RWA) ratio decreased to 9.4% in 2015 from 9.6% in 2014, a level that compares well with similarly rated domestic banks. The impact on Davivienda's FCC ratio was less, as the bank's goodwill was in Colombian pesos (COP1.6 trillion) versus USD, which reduced this deduction from capital. However, Fitch notes Davivienda's FCC ratio is weak compared with international peers (universal commercial banks in the 'bbb' rating category operating environments).

Despite increased funding costs, higher non-interest revenues offset a slight decline in margins during 2015. Operating expenses increased at a slower pace than revenues; thus, overall efficiency continued to improve. Credit costs also increased due to coverage of specific exposures. Nevertheless, the bank's operational ROAA of 2.27% continued to compare favorably with international peers and was above Davivienda's historical average of 2.05% from 2011-2014.

Moderate growth in its core market and a renewed risk appetite in Central America should drive Davivienda's growth in 2016. Less dynamic economic growth and potential margin pressures may detract from profitability, although Fitch expects the bank's efficiency and controlled credit costs to continue to underpin internal capital generation.

Portfolio quality remained stable as NPLs increased only slightly to 1.9% at end-March 2016 as a result of a specific case in the infrastructure sector that affected all of the large Colombian banks. Nevertheless, Davivienda's loan quality ratios continued to compare well with similarly rated international peers. NPLs have remained between 1.5% and 2.0% for the past five years. Asset quality has steadily improved in Central America and is now on par with that of Colombia. The introduction of IFRS led to a reduction of reserves, though coverage of NPLs remained high (1.6x at end-March 2016) and continued to provide an adequate cushion against unexpected asset deterioration.

Davivienda's funding remained stable at home but the mix has somewhat changed abroad, as deposit growth in Central America was mainly driven by time deposits. The bank tapped global and local markets for senior and subordinated debt issuances and remains an attractive name for investors at home and abroad. In addition, its use of capital markets funding improved the bank's asset/liability matching.

The performance of Davivienda's foreign subsidiaries continued to improve. The bank's subsidiaries resumed asset growth, re-balanced their funding, increased efficiency, and improved asset quality, which is now similar on average to that of Davivienda within Colombia.

SUPPORT RATING AND SUPPORT RATING FLOOR

The bank's SR and SRF reflect Davivienda's size, systemic importance and the country's historical support policy. Fitch believes there is a high probability of sovereign support, whose ability to provide support reflects the country's financial and fiscal standing (Colombia is currently rated 'BBB'/'BBB+' with a Stable Outlook).

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Davivienda's subordinated debt is rated one notch below its VR to reflect lower expected recoveries, while there is no notching differentiation based on incremental non-performance risk given the terms of the issuances (plain-vanilla subordinated debt). The debt has thus been affirmed due to the affirmation of Davivienda's VR.

GRUPO BOLIVAR NATIONAL RATINGS AND SENIOR DEBT

Grupo Bolivar S. A.'s (GB) National Ratings reflect the creditworthiness of its main subsidiary, Banco Davivienda. GB owns 55.9% of Davivienda. GB ratings are aligned with Davivienda's because of a low double leverage (December 2015: 102.89%) supported by a high level of earnings retention and strong cash flow metrics that sufficiently meet its debt service requirements.

RATING SENSITIVITIES

VR, IDRS, NATIONAL RATINGS AND SENIOR DEBT

Upside potential for the ratings is limited given current capitalization levels and the sovereign's current rating and Outlook.

A significant decline in performance and or weaker asset quality that erodes the bank's Fitch core capital or reserve cushion (below 9% or 100%, respectively) and/ or poor management of the new subsidiaries would negatively affect the bank's VR and IDRs.

SUPPORT RATING AND SUPPORT RATING FLOOR

The SR and SRF are potentially sensitive to any change in assumptions as to the propensity or ability of Colombia to provide timely support to the bank.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt ratings will mirror any action on the bank's VR.

GRUPO BOLIVAR NATIONAL RATINGS AND SENIOR DEBT

GB National ratings will mirror any action taken on Davivienda's ratings. GB's substantial increase of its leverage (double leverage above 120%) or a decline in the dividend flows from the operating companies that result in a deterioration of its debt coverage ratios would pressure GB's ratings.

Fitch has affirmed the following ratings:

Banco Davivienda S. A.

--Long-Term Foreign Currency IDR at 'BBB'; Outlook Stable;

--Long-Term Local Currency IDR at 'BBB'; Outlook Stable;

--Short-Term Foreign Currency IDR at 'F3';

--Short-Term Local Currency IDR at 'F3';

--Viability rating at 'bbb';

--Support Rating at '2';

--Support Rating Floor at 'BBB-';

--National Long Term rating at 'AAA(col)'; Outlook Stable;

--National Short term rating at 'F1+(col)';

--Senior unsecured debt at 'BBB';

--Subordinated debt at 'BBB-';

--National scale Senior unsecured debt at 'AAA(col)';

--National scale Subordinated debt at 'AA+(col)'.

GRUPO BOLIVAR S. A.

--National Long-Term rating at 'AAA(col)'; Outlook Stable;

--National Short-term rating at 'F1+(col)';

--National scale senior unsecured debt at 'AAA(col)'.