Fitch Affirms BBVA Colombia S.A.'s IDRs at 'BBB+'; Outlook Stable
KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND SENIOR DEBT
The bank's IDRs, National and senior debt ratings reflect the expected support from its parent (BBVA; rated 'A-'/Outlook Stable) if it should be required. According to Fitch's rating criteria, BBVA Colombia is considered a strategic subsidiary of BBVA given its position on the Latin American footprint of its Spanish parent, also its profitability, growth potential, integration with its parent in terms of franchise, business model and management were also considered.
VR
The bank's VR reflects its good asset quality, sustained profitability and improved capital/reserve cushions, which are generally in line with other similarly rated entities. Moreover, BBVA Colombia's strengthened risk management processes and the stable operating environment in Colombia give an additional level of comfort as to the sustainability of these indicators.
A large cash and equivalents position coupled with liquid and relatively safe investments contribute to BBVA Colombia's sound liquidity ratios. Contingency liquidity plans complete a process that has been strengthened following the global credit crunch. Despite its growing franchise and improved funding; the bank is exposed to a maturity mismatch common to many banks in Latin America, while the growing share of mortgages and consumer lending suggests a cautious approach towards liquidity and enhancing its funding sources.
The stable economic backdrop, despite lower economic growth in Colombia, and bolstered credit process have contributed to improve asset quality which is now better than the industry average. This is complemented by sound loan loss reserve coverage (2.5 times (x) impaired loans and about 3.4% of total loans). Recent expansion trends may result in a slight deterioration on its asset quality ratios, but these should remain better than those of its local peer group.
Sustained profitability and a moderate dividend policy have allowed BBVA Colombia to stabilize its capital ratios (Fitch core capital declined to about 10% at December 2014). The bank's capital is deemed adequate considering its ample loan loss reserves, improved asset quality and risk management, good profitability and strengthened Tier 1 capital.
SUPPORT RATING
The bank's Support Rating reflects its strategic importance to its parent BBVA. Support from BBVA would, in Fitch's opinion, be forthcoming, if needed.
RATING SENSITIVITIES
IDRS, NATIONAL RATINGS AND SENIOR DEBT
The bank's IDRs, National and senior debt ratings would change if Fitch's assessment of its parent's ability and/or willingness to support the bank changes. In general, the IDRs would move in line with those of the parent, subject to country ceiling restrictions.
VR
In the medium term, the bank's VRs could improve if it is able to maintain an adequate performance while sustaining adequate asset quality and capital/reserves cushion (90-day PDLs below 2.5% and FCC above 11%) amid a sound economic environment.
The VRs could be pressured by severe asset quality deterioration or a dismal performance that would erode its capital and reserve cushion on a sustained manner (90-day PDLs above 3.5% and FCC below 10%).
SUPPORT RATING
BBVA Colombia's Support Rating would be affected by a change in its parent's ability or willingness to support the bank
Fitch has affirmed the following rating:
BBVA Colombia S.A.
--Foreign currency and local currency long-term IDRs at 'BBB+'; Outlook Stable;
--Foreign currency and local currency short-term IDR at 'F2';
--Support Rating at '2';
--Viability Rating at 'bbb';
--Subordinated debt at 'BBB';
--National long-term rating at 'AAA(col)'; Outlook Stable;
--National short-term rating at 'F1+(col)';
--National senior unsecured debt at 'AAA(col)';
--National long-term subordinated debt at 'AAA(col)'.
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