News Column

Fitch: Argentine Banks Will Absorb New Caps on Lending Rate

June 13, 2014



NEW YORK--(BUSINESS WIRE)-- The Argentine central bank's move to ease borrowing conditions by setting caps on the interest rates and fees charged by banks on consumer loans should not be a major challenge to the affected banks' ratings, according to Fitch Ratings. The impacted banks maintain good asset quality and capitalization levels with adequate profitability, even after adjusting for the country's very high inflation. Ratings on Argentina's banks are constrained to no higher than 'B-' by Argentina's local currency sovereign rating (B-, Negative Outlook).

Though the central bank's action is clearly not friendly to the nation's banking sector, Fitch does not believe it represents a material challenge to local banks. The move essentially limits their room to further maneuver, should additional intervention measures be implemented.

Since 2012, when Argentina's sovereign rating was downgraded, Fitch has factored potential government interventions into bank rating assessments. That rating change was driven by increased state tightening of capital controls and the inability of certain provinces to access U.S. dollars to repay their dollar-denominated debt under local law.

We are also not surprised by the action, as other Latin American central banks in Venezuela, Ecuador and Bolivia have taken such monetary steps in the past.

Over time, we believe Argentina's banks will adjust to this limitation and find ways to compensate for the income it will forgo. Nonetheless, the risk remains for further government intervention that could materially challenge the banks.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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

Alejandro Garcia, CFA, +52 (81) 8399-9146

Senior Director

Latin American Financial Institutions

or

Matthew Noll, CFA, +1 212-908-0652

Senior Director

Financial Institutions Fitch Wire

33 Whitehall Street

New York, NY

or

Media Relations:

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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