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December 26, 2007 |
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BANCO AGRICOLA: Fitch Changes Rating Outlook to Positive Fitch Ratings has upgraded El Salvador-based Banco Agricola's support rating to '3' from '5', given the likelihood of support of its parent, Bancolombia. At the same time, its Support rating floor was Withdrawn, while other ratings were affirmed, and the Outlook on the long-term ratings was revised to Positive from Stable. The list of all rating actions is: -- Long-term foreign currency Issuer Default Rating (IDR) affirmed at 'BB+'; -- Short-term foreign currency IDR affirmed at 'B'; -- Individual affirmed at 'C/D'; -- Support upgraded to '3' from '5', and removed from Rating-Watch Positive; -- Support rating floor at 'NF', withdrawn; -- National-scale long-term rating affirmed at 'AA+(slv)'; -- National-scale short-term rating affirmed at 'F1+(slv)'. -- National-scale rating for local issues of senior unsecured debt, affirmed at 'AA+(slv)'; -- National-scale rating for local issues of senior secured debt, affirmed at 'AAA(slv)'. The rating outlook on the long-term IDR and national-scale ratings is positive. Agricola's Individual and IDRs reflect its sound franchise and sustained improvements in profitability, capitalization and asset quality, but also consider the challenging operating environment and modest liquidity. Its '3' support rating is driven by the propensity to support of its ultimate parent, Bancolombia. Should it be required, Fitch believes Agricola would look to Bancolombia for support. Although we consider that Bancolombia has a strong propensity to support Agricola, the 'BB+' IDR of the parent indicates that the probability of support is moderate. Agricola's performance has improved consistently over the past few years, underpinned by its well-contained cost base, strong loan growth and gradually increasing interest margins, although revenue diversification is still limited. Common to most other banks in the region, recent earnings are also boosted by low provisions, which in turn, reflect the strong economic and operating environment. Agricola aims at maintaining the impaired to total loans ratio below 2%. Asset quality has improved as evidenced by the steady decline of past due and restructured loans (September 2007: 1.5% and 3% of total loans, respectively). Reserve coverage still appears relatively low (2.2% of total loans), but the bank is gradually rebuilding its reserves. A stringent measure of asset quality, 'net past-due loans plus restructured loans plus net foreclosed assets plus net loans swapped to FICAFE' has rapidly declined to 3.3% of total assets. Borrower concentrations are slightly increasing, with the 20 largest exposures accounting for 137% of equity. Agricola's ample and stable customer deposit base is a major strength. These provided 80% of total non-equity funding at September 2007. The bank's liquid assets and marketable debt have somewhat declined in view of loan growth, but remained at a reasonable 33% of deposits and money market funding. The equity-to-assets ratio has steadily increased and stood at 11% as of September 2007 (2004: 9.1%). Moreover, the rapid decline in the net balances of foreclosed assets and FICAFE loans has further improved the quality of capital. Agricola is a leading and broader diversified banking institution in El Salvador and one of the largest Central American banks. At end-June 2007 the bank had a market share of 28% of the system's assets. Inversiones Financieras Banco Agricola (IFBA) is the bank's holding company. IFBA's parent is the Panamanian Banagricola, S.A., which in addition to IFBA, also holds a majority stake in the relatively small commercial bank Banco Agricola (Panama). In turn, Agricola's subsidiaries are credit card issuer Credibac S.A de C.V. and the leasing company Arrendadora Financiera S.A., both being fully consolidated. Although these are relevant to Agricola's business strategy from a commercial perspective, they are not materially important in terms of assets or earnings. In May 2007, Bancolombia completed the acquisition of Banagricola through Bancolombia (Panama), which was announced in December 2006. Bancolombia holds an 89.15% stake in Banagricola, which will be increased shortly to over 98%. Bancolombia's IDRs and Individual ratings are 'BB+' and 'C/D', respectively. Banco Agricola is El Salvador's largest bank, with a deposit and asset market share of 28% at end-June 2006, and is part of one of the largest financial groups in Central America. IFBA owns a 92% stake in Banco Agricola and majority stakes in subsidiaries in the insurance, stockbrokerage and pension fund management sectors. In turn, Banco Agricola's subsidiaries are credit card issuer Credibac and the leasing company Arrendadora Financiera. At end-June 2006, Banco Agricola had US$3.1 billion in assets and a nation-wide network of 61 branches and 342 ATMs, but has an additional presence of 178 domestic points-of-sale plus 24 agencies in the United States to handle remittances. |
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