Fitch Affirms Bancaribe's VR and IDRs

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has today affirmed Banco del Caribe, C.A. Banco Universal's (Bancaribe) Viability Rating (VR) at 'ccc' and its Issuer Default Ratings (IDRs) at 'CCC'. No Rating Outlook is assigned at this rating level. Fitch has taken this rating action following private-sector Venezuelan banks peer review. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS

VR, IDRS AND NATIONAL RATINGS

The operating environment as well as Bancaribe's funding and liquidity profile highly influence the bank's VR and IDRs. Like all Venezuelan banks, the sovereign's creditworthiness constrains Bancaribe's international ratings due to exposure to public sector (mostly sovereign) securities, as well as vulnerability to the government's policy choices and the country's economic performance. Venezuela's IDR is currently rated 'CCC' by Fitch. High inflation distorts the comparison of financial metrics with regional peers (Latin American commercial banks with a VR of 'b+' and below). Bancaribe's national scale ratings consider the same strengths and weaknesses as its international ratings, but based on the relative creditworthiness of entities within Venezuela.

Bancaribe's liquidity is similar to that of the private-sector Venezuelan banks rated by Fitch. Given the bank's high level of liquid assets, the large negative mismatch between short-term assets and liabilities typical of Venezuelan banks is manageable as long as domestic monetary market conditions remain liquid and any potential liberalization of capital controls is measured.

Bancaribe's impaired loan ratios are in line with its domestic peers rated by Fitch. However, Bancaribe's higher proportion of unsecured consumer loans has potential for deterioration in the current economic crisis. In addition, the bank's cushion to absorb unexpected losses compares below Venezuelan larger banks.

Bancaribe's equity/assets ratio has relatively remained stable over the past four years due to a high level of retained earnings. Bancaribe's regulatory capital ratio has been also stable, reflecting a higher proportion of public sector securities and compulsory loans on its balance sheet, which carry lower risk weights. Fitch believes that capital ratios will remain under pressure in 2016 due to inflation induced asset growth, though exchange rate gains from a potential devaluation could offset this somewhat. Although capitalization is in line with domestic peers, it lags that of other regional peers domiciled in highly speculative grade countries.

While the bank's liquidity profile is sufficient for its market, a high proportion of Bancaribe's liquid holdings are in Venezuelan public sector instruments. Furthermore, like all Venezuelan banks, Bancaribe has a large negative mismatch between its short-term assets and liabilities. However, this position is manageable under Venezuela's current scheme of foreign exchange controls.

SUPPORT RATING AND SUPPORT RATING FLOOR

Bancaribe' Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'NF' reflect Fitch's expectation of no support. Despite the banks' systemic importance, support cannot be relied upon given Venezuela's very low rating and lack of a consistent policy on bank support. Government interference in the banking system could also negatively influence from foreign shareholders support if required.

RATING SENSITIVITIES

VR, IDRS AND NATIONAL RATINGS

The bank's IDRs and National ratings are sensitive to changes in the sovereign's IDRs, resulting in a similar action on the IDRs and VRs of the bank, which are currently capped at the sovereign. Additional government intervention that pressures the bank's financial performance could negatively affect the bank's IDRs, VRs and National ratings. While not Fitch's base case due to capital controls and liquidity in the domestic market, a persistent decline in deposits would pressure ratings.

Upside potential to any of the bank's ratings in the near term is limited in light of the current economic crisis.

SUPPORT RATING AND SUPPORT RATING FLOOR

Venezuela's propensity or ability to provide timely support is not likely to change given the sovereign's low speculative-grade ratings. As such, the SR and SRF have no upgrade potential.

Fitch affirmed Bancaribe's ratings as follows:

--Long-term foreign and local currency Issuer Default Ratings at 'CCC';

--Short-term foreign and local currency ratings at 'C';

--Viability rating at 'ccc';

--Support at '5';

--Support floor 'NF';

--National long-term rating at 'A-(ven)'

--National short-term rating at 'F2(ven)'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Global Bank Rating Criteria (pub. 20 Mar 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996752

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996752

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151215006559/en/

Fitch Ratings
Primary Analyst
Theresa Paiz-Fredel
Senior Director
+1-212-908-0534
Fitch Ratings, Inc.
33 Whitehall St
New York, NY 10004
or
Secondary Analyst
Andres Marquez
Director
+571 3269999 Ext 1220
or
Committee Chairperson
Rene Medrano
Senior Director
+503 2516-6610
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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