NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has downgraded Banistmo, S.A.'s (Banistmo) Viability
Rating (VR) to 'bbb-' from 'bbb'. The bank's Issuer Default Ratings
(IDRs), Support Rating, and national ratings were unaffected as all are
driven by the potential support that Banistmo would receive form its
parent, Bancolombia, S.A., if needed. A complete list of Banistmo's
current ratings follows at the end of this press release.
The downgrade follows Fitch's assessment of Banistmo's intrinsic
creditworthiness after the completion of the acquisition of Banistmo by
Bancolombia and the spinoff of the bank's subsidiaries, which resulted
in a sustained reduction on its size and lower income diversification.
Banistmo'sVR was downgraded as Fitch believes that the bank's financial
profile is no longer consistent with its 'bbb' peers
KEY RATING DRIVERS
IDRs, Support Rating, National Ratings
Banistmo's current IDRs, Support Rating, and national ratings were
unaffected in this rating action but were reviewed last November (see
'Fitch Downgrades Banistmo's IDRs to 'BBB'/'F2'; Outlook Stable', Nov.
4, 2013, available at www.fitchratings.com).
These ratings are driven by the support it would receive from its new
parent, Bancolombia, S.A. ('BBB'/Outlook Stable), should it be required.
Support should be forthcoming for Banistmo given its key role within
Bancolombia's regional strategy and significant growth prospects. The
bank is considered by Fitch as core to Bancolombia according to Fitch's
Criteria 'Rating FI Subsidiaries and Holding Companies'.
Banistmo's current VR reflects the bank's sound operating environment,
ample funding and liquidity, and moderate risk appetite. Banistmo's
intrinsic creditworthiness is tempered by its modest performance and
lower than average loan loss reserve cushion.
Banistmo's financial profile has the highest influence on its VR.
Banistmo's financial performance deteriorated in 2013 due to
extraordinary expenses related to the spinoff of its subsidiaries. Fitch
expects the bank's performance to gradually improve over 2014; although
it will remain weak compared with its peers and detract from internal
capital generation. Tighter margins, moderate loan loss provisions and
operating expenses will continue to weigh on Banistmo's net income in
2014. Given the increasingly competitive Panamanian market, Fitch
estimates that the bank's ROAA will stay below 1% over its forecast
The bank's capital position is adequate, albeit remains below average
when compared to some regional players. Banistmo'sFitch Core Capital
(FCC) ratio improved to 11.1% at end-September 2013 as assets
contracted. The bank targets a minimum regulatory capital ratio above
11%, and Fitch estimates that the Fitch Core Capital ratio will stay
close to 11%. In Fitch's opinion, there is a high probability that
Bancolombia could provide capital, should it be required.
Banistmo's asset quality also improved, but compared negatively with
local peers. Banistmo's nonperforming loan (NPL) ratio reached 1.8% at
end-September 2013, while the Panamanian banking system average was
0.7%. Similarly, at 57% as of Sept. 30, 2013, the bank's reserves
coverage of impaired loans was also weak relative to that of its peers
(above 125%). Weaker asset quality is partially mitigated by the bank's
sound credit and risk management policies and a history of limited loan
Banistmo'sVR could be pressured if sustained asset quality
deterioration undermines the bank's financial performance, causing a
decline in its FCC ratio, or weakening its reserve coverage. More
specifically, Banistmo'sVR could be downgraded if its FCC to Weighted
Assets and/or Tangible Common Equity to Tangible Assets ratios fall
below 10% or 8%, respectively; and/or if operating ROAA remains
consistently below the market average. There is limited upside potential
in the near future for Banistmo'sVR.
Banistmo's IDRs, Support Rating, and national ratings are sensitive to a
change in Fitch's opinion on the parent's capacity and/or propensity to
support its subsidiaries. They could be upgraded if Bancolombia's IDRs
Fitch has downgraded Banistmo'sVR as follows:
--Viability Rating downgraded to 'bbb-' from 'bbb'.
Banistmo's IDRs, Support and National Ratings remain unaffected:
--Long-term IDR at 'BBB'; Outlook Stable;
--Short-term IDR at 'F2';
--Support Rating at '2'.
--National long-term rating at 'AA+(pan)'; Outlook Stable;
--National short-term rating at 'F1+(pan)'.
Additional information is available on www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Jan. 21, 2014).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
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Diego Alcazar, +1-212-908-0396
One State Street Plaza
New York, NY 10004
Carmen Matamoros, +503 2516 6612
Theresa Paiz Fredel, +1-212-908-0534
Elizabeth Fogerty, New York,
Source: Fitch Ratings