Fitch Affirms Banco General at 'BBB+'; Outlook Stable
Fitch Ratings has today affirmed Banco General S.A.'s (BG) long-term foreign currency Issuer Default Rating (IDR) at 'BBB+'. A complete list of BG's ratings is provided at the end of this release.
BG's Viability Rating (VR), which underpins its IDR, reflects the bank's solid franchise, sound and consistent performance, robust capital levels, conservative policies, good asset quality and reserves, ample deposit base and well diversified portfolio. Fitch's view of BG's creditworthiness is tempered by the heightened competition it faces and the lack of a lender of last resort.
A long-standing dollarized economy, Panama lacks a lender of last resort. Banco Nacional de Panama, the largest state controlled bank, could only provide temporary liquidity loans. In Fitch's opinion, external support for BG cannot be relied upon, underpinning the bank's support rating of '5' and support rating floor of 'NF'.
Healthy and balanced growth within generally stable environments will underpin BG's ratings as it expands abroad and faces strong competition at home.
Should asset quality decline sharply, performance weaken or capitalization deteriorate, BG's ratings could face some downward pressure.
Banco General S.A. is Panama's largest locally owned bank. It has one of the largest branch networks, presence in most market segments, a significant market share, and a reputation for conservative and consistent policies. BG has been perceived as a safe heaven in times of local stress.
Steady growth, low cost deposits, and sound asset quality contribute to BG's stable performance that reflects high efficiency and sound profitability. BG's performance metrics compare quite well to those of the region's top banks with similar VRs.
Armed with a strong capital base that is little encumbered by goodwill or fixed assets, BG enjoys an ample cushion against unexpected losses on top of adequate loan loss reserves. This sound balance sheet structure underpins BG's ratings.
BG's board and experienced management have set up conservative policies that significantly mitigate risks and have served well the bank as it grew without taking excessive risks.
A wide, low-cost, well-diversified deposit base has steadily grown accompanying the bank's expansion and largely funds the loan portfolio. This gives BG a clear competitive advantage that the bank is able to leverage to expand its business and curb risk.
A sound economic background, cautious credit policies, and effective collection processes help curb past-due loans (PDLs) and maintain robust asset quality. Loan loss reserves cover PDLs comfortably. Asset quality should deteriorate moderately as BG expands into retail.
BG's loan portfolio is well diversified, does not show undesired concentrations and remains a steady source of revenues. Similarly, the investment portfolio has a relatively low risk profile and provides an ample liquidity cushion.
As part of BG's strategic plan, the bank is more active in Central America and besides building its franchise from scrap in Costa Rica, is constantly looking for opportunities to buy portfolios and/or acquire a bank that fits its long-term strategy.
Panama's relatively high bank penetration and large number of players create a highly competitive environment. In Fitch's view, BG must maintain its credit discipline and balanced risk/reward criteria to avoid asset or performance deterioration.
Fitch affirms BG's ratings as follows:
--Long-term foreign currency Issuer Default Rating (IDR) at 'BBB+'; Outlook Stable;
--Short-term foreign currency IDR at 'F2';
--Viability rating at 'bbb+';
--Support rating at '5';
--Support rating floor at 'NF'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria, Aug. 15, 2012
Treatment of Hybrids in Bank Capital Analysis, Jul. 09, 2012
Rating Financial Institutions Above the Local Currency Sovereign Rating, Dec. 20, 2011
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Treatment of Hybrids in Bank Capital Analysis
Rating Financial Institutions Above the Local Currency Sovereign Rating
Elizabeth Fogerty, New York, Tel: +1-212-908-0526
Diego Alcazar, Director, +1-212-908-0396
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Carmen Matamoros, Associate Director, +503-2516-6600
Theresa Paiz-Fredel, Senior Director, +1-212-908-0534