News Column

Fitch Affirms Multibank's L-T IDR at 'BB+'; Outlook Stable

May 30, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed Multibank's (MB) viability (VR) and long-term Issuer Default Rating (IDR) at 'bb+' and 'BB+' respectively. The Rating Outlook is Stable. Fitch has also affirmed the bank's national ratings. A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS - IDRs, VR and National Ratings

MB's viability rating (VR) drives its Long-term IDR and national ratings. The bank's risk appetite for growth and capitalization levels highly influences its VR. The ratings also consider sound asset quality, an improved funding mix and adequate liquidity. The Rating Outlook on the bank's long-term IDRs is Stable given MBs consistent financial performance. Nevertheless, it remains challenging for MB to improve its competitive position and enhance its profitability metrics to support internal capital generation and future growth in a highly competitive market.

MB has emerged as a relevant contender in the middle market and retail segments in Panama. MB has steadily expanded its network, heightened its profile and improved its franchise as the bank increased its market share to 3.7% of general licensed banks' total unconsolidated assets by YE13.

Resilient margins and growing loan volumes coupled with moderate credit costs allowed MB to post moderate but consistent profitability ratios. MB will need further income diversification and cost control to face competition and rising interest rates.

Sound credit origination, adequate remedial management and a positive operating environment underpinned asset quality. Past due loans (PDLs) for 90-plus days stood at approximately 1% at YE13 and are well covered by reserves. Concentration on both sides of the balance sheet is moderate after years of continuous improvement.

The overhauled commercial strategy helped widen the deposit base while changing the deposit mix and lowering funding costs. MB's liquidity remains sound and is supplemented by adequate contingency plans. However, the increase of longer-tenor loans creates the need to further diversify funding to prevent undesired asset/liability gaps in a highly competitive market that could create pressures to become more aggressive in credit or pricing.

As the Panamanian economy boomed, MB grew into retail and SME but also found opportunities arising from the consolidation at the top of the market. Accordingly, MB gained in market share and diversified and strengthened its balance sheet. Moreover, the bank has embarked on an expansion abroad leveraging its expertise in SME and consumer sectors.

KEY RATING DRIVERS: SUPPORT RATING AND SUPPORT RATING FLOOR

The banks' Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'NF' reflect Fitch's expectation of no support. As a longstanding dollarized economy, Panama lacks a lender of last resort, though Banco Nacional de Panama, the largest state controlled bank, could provide temporary liquidity loans.

RATING SENSITIVITIES - VR, IDRs AND NATIONAL RATINGS

A sustained improvement in the bank's capital position (FCC above 11%) driven by sufficient internal capital generation to support MB's expected asset growth could lead to an improvement in the bank's ratings. Additionally, the ratings could improve in the medium term if the bank continues to solidify its franchise and diversify its revenues while maintaining low concentrations on both sides of the balance sheet and good asset quality.

Multibank's ratings could be negatively affected by a decline in its capital and reserves cushion, or a significant weakening of its profitability (ROAA below 1.2%). Additionally, rapid growth which pressures the bank's Fitch Core Capital ratio below 9% could also be negative.

SUPPORT RATING AND SUPPORT RATING FLOOR

Given Fitch's view of Panama's limited ability and willingness to support MB, Fitch considers that there is no upside potential in these ratings over the foreseeable future.

Fitch has affirmed MB's ratings as follows:

--Long-term IDR at 'BB+'; Outlook Stable;

--Short-term IDR at 'B';

--Viability Rating at 'bb+';

--Support Rating at '5';

--Support Rating Floor at 'NF';

--National scale long-term rating at 'AA-(pan)'; Outlook Stable;

--National scale short-term rating at 'F1+(pan)'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'National Ratings Criteria' (Jan. 19, 2011);

--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 5, 2012).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=832373

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.



Fitch Ratings, Inc.

Primary Analyst

Diego Alcazar, +1-212-908-0396

Director

33 Whitehall St.

New York, NY 10004

or

Rene Medrano, +503 2516-6610

Senior Director

Committee Chairperson

or

Theresa Paiz-Fredel, +1-212-908-0534

Senior Director

or

Media Relations

Elizabeth Fogerty, +1-212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Business Wire


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters