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April 18, 2008 |
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NUEVO BANCO: Fitch Lifts Foreign Currency ID Rating to BB- Fitch Ratings has upgraded Nuevo Banco Comercial's Foreign currency long-term issuer default rating to 'BB-' from 'B+' and its national long term rating to 'AA(ury)' from 'AA-(ury)' positive outlook. In addition, Fitch has affirmed these ratings of Nuevo Banco Comercial: -- Local currency long-term issuer default rating at 'BB-', -- Support Rating at '4'; -- Support Floor at 'B'. The rating outlook is stable. The upgrade in Nuevo Banco Comercial's foreign currency IDR and national long-term rating reflects the bank's steadily improving operating performance, while maintaining high liquidity and capitalization levels. As the former rating is not constrained by the sovereign since this was upgraded, it is now aligned to the bank's local currency IDR. While Nuevo Banco Comercial's net earnings declined in 2007 as a result of the impact of foreign exchange losses on the bank's significant asset position in US$, its operating revenues have grown significantly, with interest income and fees growing strongly. Fitch Ratings expects the bank's operating performance to continue to improve, although its net income could be affected again by variations in the foreign exchange rate. While Fitch recognizes that the bank's position in US$ is generated by the main shareholder's decision to maintain its investment in US$, this is considered negative for Nuevo Banco Comercial as it adds volatility to its profitability. Nuevo Banco Comercial's asset quality is adequate and its ratios have improved. Although a significant proportion of loans (21.8% at end-2007) fall under the higher risk categories 3, 4 and 5 due to stringent classification rules imposed by the Central Bank of Uruguay, only 2.2% of the loan book is past-due -- 60 days or more overdue, under local definitions. Loan loss reserves covered 4.4% of total loans and 200% of past-due loans at end-2007, which is considered adequate. Nuevo Banco Comercial's funding is mainly through deposits; liquidity continues to be high, with liquid assets representing 54.2% of deposits and short-term funds. The bank's capitalization is adequate. Total equity represented 15.2% of assets and 21.7% of risk-weighted assets at end-2007. Fitch expects these ratios to go down as lending keeps on growing. NBC is the second-largest private bank in Uruguay. Its market presence is significant in all segments and it had 16.9% of the system's assets at end-2007. Advent International controls 60% of the bank's equity, with the Uruguayan government still owning the remainder in the form of preferred stock. Fitch is aware of negotiations being held by Advent to sell the bank and will evaluate the potential effect on the bank's ratings if this operation takes place. Nuevo Banco, Uruguay's second largest private sector bank, was formed in March 2003 from the assets of three local banks that were intervened and suspended due to a "run on deposits" during Uruguay's financial crisis in 2002. The Uruguayan government sold Nuevo Banco to a group led by Advent International for US$167 million in September 2005. Nuevo Bank has UYU29.7 billion in assets and some 106,000 customers. |
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