Fitch Affirms Banco Nacional de Credito's IDR at 'CCC'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has today affirmed Banco Nacional de Credito, C.A.'s, (BNC) foreign and local currency Long-Term Issuer Default Rating (IDR) at 'CCC' and Viability Rating (VR) at 'ccc' following Fitch's peer review of Venezuelan Banks. No Rating Outlook is assigned at this rating level. A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS - IDRs, VR and NATIONAL RATINGS

The operating environment is the key factor constraining BNC's VR, which drives its IDR and does not take into account state support. Like all Venezuelan banks, BNC's VR is strongly linked to the creditworthiness of the sovereign, given the significant level of government intervention, high level of exposure to sovereign securities and its vulnerability to the government's policy choices and the country's economic performance.

BNC's ratings are also heavily influenced by the bank's liquidity and funding profile. Although most deposits are available upon demand, deposits have been stable, in part due to the government's capital controls. Furthermore, expansive fiscal and monetary policies continue to drive deposit growth. BNC has a large negative mismatch between short-term assets and liabilities, and access to longer-term funding is limited, as is the case across the Venezuelan banking system.

BNC's loan growth has consistently exceeded that of the system since 2012, while its exposure to the public sector is among the highest compared with other Venezuelan universal/commercial banks rated by Fitch. However, the bank's corporate focus, conservative lending policies and low-risk products reduced impaired loan levels, which, combined with rapid nominal loan growth, has resulted in a consistent improvement in impaired loan ratios.

BNC's reserves for impaired loans grew significantly less than gross loans during 2015, resulting in a sharp decline in its reserves for impaired loans/gross loans ratio to a level that is well below that of the Venezuelan system and its domestic peers. In light of loan concentration and the fragility of the economic environment, Fitch views this level as weak.

High nominal loan growth has led to tighter capitalization in 2015, despite stronger profitability, curbs on dividend payments and fresh capital injections. The bank's tangible common equity to tangible assets ratio was consistent with its Venezuelan peers at 3Q15. Capital levels are considered weak relative to Latin American peers in highly speculative countries, particularly in light of the decline in BNC's overall cushion to absorb unexpected losses.

BNC's profitability continued to lag that of its Venezuelan peers in 2015. Despite similar margins, the bank's lower efficiency and limited cross-selling hinders profitability. When adjusted for inflation, the bank reported a loss in 2014, though gains from the inflation adjustment of common equity more than offset the impact of this loss on equity.

KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR

BNC' Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'NF' reflect Fitch's expectation of no support. Support cannot be relied upon given Venezuela's highly speculative rating and lack of a consistent policy on bank support.

RATING SENSITIVITIES - IDRs, VR and NATIONAL RATINGS

Should Venezuela's macroeconomic/political woes deepen, as reflected in its sovereign ratings, BNC's ratings could be downgraded. This is the main downside risk for BNC and the rest of Venezuela's banks.

BNC's VR and Long-Term IDRs could be upgraded if the operating environment improves (more stable economic background, less intrusive regulation) and the bank reduces its exposure to the public sector. A sustained improvement of the bank's financial profile could be positive for the bank's national ratings.

RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

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

Fitch has affirmed BNC's ratings as follows:

--Long-term foreign and local currency IDRs at 'CCC';

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

--Viability rating at 'ccc';

--Support Rating at '5';

--Support Rating Floor at 'NF';

--Long-term national-scale rating at 'BBB-(ven)';

--Short-term national-scale rating at 'F3(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 Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996767

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996767

Endorsement Policy

https://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/20151215006669/en/

Fitch Ratings
Primary Analyst
Theresa Paiz Fredel
Senior Director
+1-212-908-0534
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Larisa Arteaga (Secondary Analyst - BOD, BNC)
Director
+1-809-563-2481
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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