Fitch Affirms Santander Rio's (Argentina) LC IDR at 'B-'; Outlook Negative
BUENOS AIRES, Argentina -- March 20, 2013
Fitch Ratings has affirmed Banco Santander Rio S.A.'s (Santander Rio)
Viability Rating (VR) and Local Currency Long-term Issuer Default Ratings
(IDRs) at 'b-' and 'B-', respectively. The Rating Outlook on the Long-term IDR
is Negative. A full list of ratings actions follows at the end of this press
KEY RATING DRIVERS
Santander Rio benefits from the vast expertise of its largest shareholder,
Spain's Banco Santander (Santander, rated 'BBB+'; Rating Outlook Negative by
Fitch); however, given the relative high country risk and specially government
intervention over the bank business, Santander Rio's support rating remains on
5 and hence, its IDRs are driven by its VR. The latter reflects the bank's
sound franchise in Argentina, its strong profitability, its healthy asset
quality ratios, ample liquidity and improved capitalization, as well as the
volatile environment in Argentina.
The Rating Outlook on Santander Rio's LC Long-term IDR and Long-term National
Rating is Negative, in line with the outlook on Argentina's sovereign ratings,
which constrains those of Santander Rio. Downside risk to Santander Rio
ratings mainly stem from a downgrade of the sovereign rating, or a significant
decline in the bank's liquidity or asset quality, which Fitch considers
unlikely in the medium term. Upside to Santander Rio ratings currently appears
limited but could stem from an upgrade of the sovereign ratings.
Along with the benign operating environment in the past few years, Santander
Rio's profitability has been very strong, mainly based on sound interest and
commission income, which have compensated for the increase in administrative
expenses due to the high inflation rate. Fitch expects Santander Rio's
profitability to remain sound, based on its solid revenue generation capacity,
although it will probably be under pressure from slower loan growth, rising
inflation and persistent market volatility.
Santander Rio's asset quality is sound, although it has deteriorated slightly
in line with the economic slowdown in 2012. Non-performing loans were only
1.17% of the total at Dec. 31, 2012, and loan loss reserve coverage was
143.5%. Fitch expects Santander Rio's asset quality ratios to remain healthy,
although its NPL could rise somewhat in the current year in line with the
outlook for the economy. Since 2012, banks in Argentina are demanded to comply
with some rules regarding compulsory lending, that in Fitch's view may limit
their room to maneuver regarding the credit risk management, and may result in
some pressures overt the industry asset quality ratios; even when the first
results of such measures are too early to judge.
Santander Rio's funding was comprised primarily of retail deposits. While the
bank's liquidity is ample, Fitch is cautious about the large negative maturity
mismatch of all banks in Argentina given the short term nature of their
liabilities and the longer tenor on their assets; however, this position is
manageable given the strong franchise of Santander Rio and also the complex
set of capital controls in place.
The company's capital base is adequate and has been supported by its rising
profitability and the recent restrictions imposed by the Central Bank on
dividend payments; at Dec. 31, 2012 Fitch Core Capital was a sound 16.62%.
Fitch expects Santander Rio's capitalization to improve further in the medium
term as loan growth will decelerate and profitability remain solid.
Santander Rio is 99.3% owned by Santander. It is a universal bank, offering a
wide range of financial services through its 327 branches. It was Argentina's
largest private sector bank by loans and deposits at Oct. 31, 2012.
Fitch has affirmed the following ratings for Santander Rio:
--Local currency long-term Issuer Default Rating (IDR) at 'B-'; Negative
--Viability Rating at 'b-';
--Support at '5';
--Long-term National Rating at 'AA(arg)'; Negative Outlook;
--Short-term National Rating at 'A1+(arg)';
--National long-term rating on senior unsecured notes at 'AA(arg) '; Negative
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).
Applicable Criteria and Related Research
Global Financial Institutions Rating Criteria
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