News Column

Fitch Completes Peer Review for Large Dominican Banks & Related Entities

June 16, 2014

NEW YORK--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: Peer Review: Dominican Banks (Performance to Benefit from Growth)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748910

On May 14, 2014, Fitch Ratings completed a peer review for three private sector banks and their related entities as well as one state-owned bank in the Dominican Republic. At that time, Fitch affirmed the banks' ratings as detailed at the end of this release.

The four banks included in this peer review are Banco Popular Dominicano (BPD); Banco BHD S.A.(BHD); Banco de Reservas de la Republica Dominicana, Banco de Servicios Multiples (BANRESERVAS); and Banco Multiple Leon S.A.(BML). The banks are among the largest in their market and each had assets between USD7.2 billion and USD1.2 billion, with operations primarily in the Dominican Republic. With the exception of BML, the banks' Issuer Default Ratings (IDRs) are driven by their Viability Ratings (VRs), which are based on the banks' stand-alone intrinsic financial strengths. BML's IDRs factor in potential extraordinary institutional support from its parent, Centro Financiero BHD Leon.

Based on 2013 financial statements, asset quality indicators remained stable or improved at all the banks covered in this review, driven by moderate loan growth and a strengthening local economy. However, asset quality indicators at Dominican banks were weaker than international peers (emerging market commercial/universal banks with a 'b' category VR). Given better economic conditions in the Dominican Republic, Fitch believes asset quality indicator trends will be sustained in 2014.

While BML's profitability declined, it remained flat at the other private sector banks in 2013. Asset growth and better efficiency increased BANRESERVAS' profitability during this same period. Fitch expects a stronger domestic economy to strengthen the banks' financial performance over the next year due to accelerating growth and improvements in loan quality.

With the exception of BANRESERVAS, bank capitalization compared favorably with international peers. Even with accelerating asset growth Fitch expects bank capitalization to remain stable or improve in 2014 as internal capital generation increases.

As is common to other emerging market banks, all of the Dominican banks included in this review have a large negative mismatch between short-term assets and liabilities. This contractual maturity gap is somewhat mitigated by high deposit reserve requirements, deposit stability, and the availability of credit lines from other financial institutions.

Fitch published the main findings of this peer review completed in May in a report 'Peer Review: Dominican Banks', which is available at www.fitchratings.com. Fitch concludes that the large Dominican banks are well positioned to take advantage of the local economy's accelerating growth.

For further details on the particular key rating factors and rating sensitivities of each of these entities, as well as for regulatory information, please view individual rating action commentaries, published today and available in Fitch's websites at www.fitchratings.com and www.fitchca.com.

Following completion of a peer review on May 14, 2014 Fitch affirmed the following international and national ratings:

BPD

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)'.

--Long-term National subordinated debt at 'A+(dom)'

BHD

--Foreign and local currency long-term IDR at 'B'; Outlook Stable;

--Foreign and local currency short term IDR at 'B';

--Viability Rating at 'b';

--Support at '5';

--Support Floor at 'NF';

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)'.

BML

--Foreign and local currency long-term IDR at 'B'; Outlook Stable;

--Foreign and local currency short term IDR at 'B';

--Viability Rating at 'b-';

--Support at '4';

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)'.

--Long-term National subordinated debt at 'A+(dom)'

BANRESERVAS

--Foreign and local currency IDRs at 'B'; Outlook Stable;

--Short-term foreign and local currency IDRs at 'B';

--Viability Rating at 'b';

--Support Rating at '4';

--Support Floor at 'B';

--Long-term subordinated notes at 'B-'

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

--National short-term rating at 'F1+(dom)'

In addition, Fitch also affirmed the banks' related entities' ratings following the peer review:

Popular Bank Ltd. Inc y Subsidiaria (Popular Bank)

--Long-term national rating at 'AA-(dom)'; Outlook Stable;

--Short-term national rating at 'F1+(dom)';

--Long-term national rating at 'BB+(pan)'; Outlook Stable;

--Short-term national rating at 'B(pan)'.

BHD International Bank (Panama):

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)'.

BHD Valores Puesto de Bolsa SA:

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)';

--Short-term National senior unsecured debt rating at 'F1+(dom)'.

Valores Leon S.A:

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)';

--Long-term National senior unsecured debt rating at 'AA-(dom)'.

Additional information is available on www.fitchratings.com

Applicable Criteria and Related Research:

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

--'2014 Outlook: Central America and the Dominican Republic' (Dec. 16, 2013);

--'Fitch Affirms Dominican Republic's Ratings at 'B'; Outlook Stable' (Nov. 26, 2013).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

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

2014 Outlook: Central America and the Dominican Republic Insurance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=730995

2014 Outlook: Central America and the Dominican Republic

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725825

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

Theresa Paiz Fredel (Primary Analyst for BPD, BHD, BML, Banreservas), +1 212-908-0534

Senior Director

Fitch Ratings, Inc.

33 Whitehall St.

New York, NY 10004

or

Larisa Arteaga (Primary Analyst for BHDIB, BHD Valores, VL), +1 809-563-2481

Director

or

Sergio Pena (Primary Analyst for Popular Bank), +571-326-9999

Associate Director

or

Media Relations:

Elizabeth Fogerty, +1 212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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