News Column

Fitch Upgrades Banco Multiple Leon's IDRs; Outlook to Stable

February 12, 2014

Fitch Ratings has upgraded Banco Multiple Leon's Issuer Default Ratings and removed them from Rating Watch Positive.

The Rating Outlook is Stable.

Fitch placed BML's IDR on Positive Watch on Dec. 19, 2013, after the announcement that Grupo Financiero Leon, BML's main shareholder, had agreed, in an all-stock deal, to contribute its financial companies (BML, Valores Leon and Compania Nacional de Seguridad - CONASE) to Centro Financiero BHD.

On Jan. 31, the transaction was completed, thus GFL became an important shareholder of the renamed 'Centro Financiero BHD Leon'.

BML's IDR and National Rating upgrades reflect that upon the conclusion of the transaction among the shareholders of Grupo Leon and CFBHD, BML is considered a core subsidiary of CFBHDL. Hence, the IDRs and National Ratings for BML have been equalized with those of Banco BHD.

Key Rating Drivers

Banco Multiple Leon

IDRs, VR, Support and National Ratings

Despite adequate capitalization and sound liquidity management, the bank's Viability Rating reflects BML's still weak profitability ratios relative to similarly rated international peers (emerging market commercial banks with a VR of 'b-', 'b', and 'b+').

Fitch has revised BML Support rating to '4' and removed it from Rating Watch Positive to reflect the expected support to be received from the renamed CFBHDL. Given that the source of support has changed from the state to institutional, the Support Floor has been withdrawn.

BML's subordinated debt rating has been upgraded to reflect the expected support from its new shareholder, but remains one notch down from the long-term National Rating of the bank, given its subordination to all senior creditors.

Valores Leon - National Ratings

Valores Leon's National Ratings have been removed from Rating Watch Positive and upgraded to the same level as BML's ratings. Valores Leon's ratings reflect the operational and financial support provided by BML. In Fitch's view, the entity is important to Grupo Leon, as it is a key and integral part of its business, and provides some financial products to core clients. This will continue to be the case once Valores Leon merges with BHD Valores.

Rating Sensitivities

BML

BML's IDRs, VR, Support Rating and National Ratings will be withdrawn once the actual merger with Banco BHD occurs. This is expected to be completed during the first half of 2014. A change in the capacity or propensity of CFBHDL to provide support could result in a revision to BML's IDRs.

Valores Leon

Valores Leon's National Ratings will be withdrawn once the actual merger with BHD Valores occurs. This is expected to be completed during the first half of 2014. A change in the capacity or propensity of BML to provide support could result in a revision to Valores Leon's ratings.

Profile

BML ranked fifth out of 15 commercial banks in the Dominican Republic, with a 5 percent market share by total assets at December 2013. Since Jan. 31, GFL is 99.36 percent owned by CFBHDL.

Fitch has taken the following rating actions:

Banco Multiple Leon SA:

--Foreign and local currency long-term IDR upgraded to 'B' from 'B-', Outlook Stable;

--FC/LC short term IDR affirmed at 'B';

--Viability Rating affirmed at 'b-';

--Support Rating upgraded to '4' from '5';

--Support Floor Rating withdrawn;

--Long-term National Rating upgraded to 'AA-(dom)' from 'A- (dom)', Outlook Stable;

--Short-term National Rating upgraded to 'F1+(dom)' from 'F2(dom)';

--Long-term National subordinated debt upgraded to 'A+(dom)' from 'BBB+(dom)'.

Valores Leon S.A:

--Long-term National Rating upgraded to 'AA-(dom)' from 'A- (dom)', Outlook Stable;

--Short-term National Rating upgraded to 'F1+(dom)' from 'F2(dom)';

--Long-term National senior unsecured debt rating upgraded to 'AA- (dom)' from 'A-(dom)'.

Additional information is available at fitchratings.com and fitchdominicana.com.

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