Breaking

BofA's Countrywide Is Ordered to Pay $1.3B for Defective Loans
Tweet TWEET

Fitch Affirms Santander Bancorp's Ratings; Outlook Negative

  Fitch Affirms Santander Bancorp's Ratings; Outlook Negative

Business Wire

NEW YORK -- June 6, 2013

Fitch Ratings has affirmed the long- and short-term Issuer Default Ratings
(IDRs) of Santander Bancorp (SBP) at 'BBB/F2'. A full list of rating actions
follows at the end of this release. The rating action was a result of Fitch's
affirmation of the long-term IDR of SBP's parent company, Banco Santander, on
May 23, 2013. The Rating Outlook for SBP is Negative, which is in line with
Banco Santander's Outlook, which remains Negative (see the press release
titled 'Fitch Affirms Santander's BBVA's and CaixaBank's Ratings', dated May
23, 2013) reflecting the close correlation between the bank and the sovereign
credit risk of Spain (rated L/T IDR BBB, Outlook Negative, by Fitch).

KEY RATING DRIVERS - VRS, IDRS AND SENIOR DEBT

Fitch affirmed SBP's standalone rating, the Viability Rating (VR), at 'bb+'.
The affirmation is supported by the company's sound operating performance and
solid capital position while operating in the challenging Puerto Rican market.
Similarly to local peers, asset quality has been a challenge given the weak
macro environment in Puerto Rico as evidenced by high unemployment of 13.7%
and continued negative Gross National Product (GNP).

Although Fitch is concerned with SBP's elevated levels of non-performing
assets (NPAs), which includes restructured loans, at 6.77% for the first
quarter of 2013 (1Q'13), it compares well to local peers with an average
nonperforming asset (NPA) of 12.22% at 1Q'13. SBP's loan portfolio exhibits
better credit performance due to more conservative underwriting and overall
risk management practices (including a relatively low concentration in
construction lending). Additionally, the company continues to build its
capital base improving its tangible common equity ratio to 9.62% for 1Q'13
compared to 8.48% for 1Q'12 attributed to internal capital generation.

RATING SENSITIVITIES -VR, IDRS AND SENIOR DEBT

Fitch believes there is limited upside to SBP's VR given the concentration in
its loan book by product and geography and relatively small franchise. The VR
could be negatively affected if loan portfolio quality deteriorates,
particularly if significant operating losses emerge and the company's capital
position is eroded.

SBP's IDRs are correlated to Banco Santander's, therefore, changes in Banco
Santander's IDRs result in changes to SBP's. SBP's IDRs would be negatively
affected if the parent bank's ratings are downgraded or Fitch's view of
support changes.

KEY RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING

The Support Rating is '2', which reflects Fitch's view that there is still a
high probability of support for SBP by its parent in the event of need.

Fitch considers SBP to be strategically important to, but not a core
subsidiary of Banco Santander. This is reflected in the support-driven IDR,
which is notched one notch below the parent company's IDRs at 'BBB'. Since
SBP's support reflects institutional support, no support rating floor is
assigned. In the event Fitch's views of support changes, its support rating
could be downgraded.

KEY RATING DRIVERS AND SENSITIVITIES - HOLDING COMPANY

SBP's IDR and VR are equalized with those of Banco Santander Puerto Rico,
reflecting its role as the bank holding company, which is mandated in the U.S.
to act as a source of strength for its bank subsidiaries. Should SBP's holding
company begin to exhibit signs of weakness, or have inadequate cash flow
coverage to meet near-term obligations, there is the potential that Fitch
could notch the holding company IDR and VR from the ratings of the bank
subsidiary.

SBP is the third largest bank in Puerto Rico by deposits with approximately a
12% share. SBP offers banking and other financial services through its
subsidiaries, Banco Santander Puerto Rico, Santander Financial Services,
Santander Securities Corporation among other smaller subsidiaries. SBP is
wholly owned by Banco Santander following the completion of a tender offer for
remaining publicly owned shares in 2010.

Fitch has taken the following rating actions:

Santander Bancorp

--Long-term IDR affirmed at 'BBB'; Outlook Negative;

--Short-term IDR affirmed at 'F2';

--Viability Rating affirmed at 'bb+';

--Support Rating affirmed at '2';

--Subordinated debt affirmed at 'BBB-'.

Banco Santander Puerto Rico

--Long-term IDR affirmed at 'BBB'; Outlook Negative;

--Short-term IDR affirmed at 'F2';

--Viability Rating affirmed at 'bb+';

--Support Rating affirmed at '2';

--Long-term deposit rating affirmed at 'BBB+';

--Short-term deposit rating affirmed at 'F2'.

Santander PR Capital Trust I

--Preferred stock affirmed at 'BB'.

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

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria (Aug. 15, 2012)';

--'Rating FI Subsidiaries and Holding Companies (Aug. 10, 2012)'.

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=793023

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.

Contact:

Fitch Ratings
Primary Analyst
Doriana Gamboa
Director
+1-212-908-0369
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Jaymin Berg
Director
+1-212-908-0368
or
Committee Chairperson
Christopher D. Wolfe
Managing Director
+1-212-908-0771
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com